Chapter
Current Liabilities 11
Accounting
Class
before Mid
Accounting eagle
Chapter 11 Part
1
Chapter
Current Liabilities 11
lo3. Explain the accounting for other current liabilities.
2)sales taxes payable
✓ Companies record sales taxes payable at the time the related sales occur.
1. The company serves as a collection agent for the taxing authority.
2. Sales taxes are not an expense to the company.
3)unearned revenues
1. Companies initially record unearned revenues in an Unearned Revenue
account.
2. As the company earns the revenue, a transfer from unearned revenue to
earned revenue occurs.
4)the current maturities of long-term
✓ Companies report the current maturities of long-term debt as a current
liability in the balance sheet.
➢MULTIPLE CHOICE QUESTIONS
71. A company receives $174, of which $14 is for sales tax.
The journal entry to record the sale would include
a debit to Sales Tax Expense for $14.
b. debit to Sales Tax Payable for $14.
c. debit to Sales for $174.
d. debit to Cash for $174.
72. A retail store credited the Sales account for the sales price and the amount of sales
tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to
$315,000, what is the amount of the sales taxes owed to the taxing agency?
a. $300,000 b. $315,000 c. $15,750 d. $15,000
2
Chapter
Current Liabilities 11
73. On January 1, 2008, Dunnon Company, a calendar-year company, issued $600,000
of notes payable, of which $150,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2008, is
a. Current Liabilities, $600,000. b. Long-term Debt, $600,000.
c. Current Liabilities, $300,000; Long-term Debt, $300,000.
d. Current Liabilities, $150,000; Long-term Debt, $450,000.
74. On January 1, 2008, Brunson Company, a calendar-year company, issued $400,000
of notes payable, of which $100,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2008, is
a. Current Liabilities, $400,000.
b. Long-term Debt , $400,000.
c. Current Liabilities, $100,000; Long-term Debt, $300,000.
d. Current Liabilities, $300,000; Long-term Debt, $100,000.
75. A cash register tape shows cash sales of $1,500 and sales taxes of $120.
The journal entry to record this information is
a. Cash .................................................................................... 1,620
Sales........................................................................... 1,620
b. Cash .................................................................................... 1,620
Sales Tax Payable...................................................... 120
Sales........................................................................... 1,500
c. Cash .................................................................................... 1,500
Sales Tax Expense.............................................................. 120
Sales........................................................................... 1,620
d. Cash .................................................................................... 1,620
Sales........................................................................... 1,500
Sales Taxes Revenue................................................. 120
3
Chapter
Current Liabilities 11
76. Jo’s Bookstore has collected $750 in sales taxes during April. If sales taxes must be remitted to
the state government monthly, what entry will Jo's Bookstore make to show the April remittance?
a. Sales Taxes Payable............................................................ 750
Cash ............................................................................ 750
b. Sales Tax Expense ............................................................. 750
Cash ............................................................................ 750
c. Sales Tax Expense .............................................................. 750
Sales Taxes Payable................................................... 750
d. No entry required.
77. Jordon Company does not ring up sales taxes separately on the cash register. Total receipts for
October amounted to $18,900. If the sales tax rate is 5%,
what amount must be remitted to the state for October's sales taxes?
a. $900 b. $945 c. $45 d. It cannot be determined.
78. Enrique's Salon has total receipts for the month of $16,430 including sales taxes. If the sales tax
rate is 6%, what are Enrique's sales for the month?
a. $15,444.20 b. $17,415.80 c. $15,500.00 d. It cannot be determined.
79. The amount of sales tax collected by a retail store when making sales is
a. a miscellaneous revenue for the store. b. a current liability.
c. not recorded because it is a tax paid by the customer. d. recorded as an operating expense.
80. A retail store credited the Sales account for the sales price and the amount of sales tax on sales.
If the sales tax rate is 5% and the balance in the Sales account amounted to $189,000,
what is the amount of the sales taxes owed to the taxing agency?
a. $180,000 b. $189,000 c. $9,450 d. $9,000
81. Advances from customers are classified as a(n)
a. revenue. b. expense. c. current asset. d. current liability.
4
Chapter
Current Liabilities 11
82. The current portion of long-term debt should
a. be paid immediately.
b. be reclassified as a current liability.
c. be classified as a long-term liability.
d. not be separated from the long-term portion of debt.
83. Sales taxes collected by a retailer are expenses
a. of the retailer. b. of the customers. c. of the government. d. that are not recognized by the retailer
until they are submitted to the government.
84. Sales taxes collected by a retailer are reported as
a. contingent liabilities. b. revenues. c. expenses. d. current liabilities.
85. Linda's Boutique has total receipts for the month of $29,295 including sales taxes. If the sales
tax rate is 5%, what are Linda's sales for the month?
a. $27,831 b. $27,900 c. $29,295 d. It cannot be determined.
86. A cash register tape shows cash sales of $1,500 and sales taxes of $90.
The journal entry to record this information is
a. Cash .................................................................................... 1,500
Sales........................................................................... 1,500
b. Cash .................................................................................... 1,590
Sales Tax Revenue..................................................... 90
Sales........................................................................... 1,500
c. Cash .................................................................................... 1,500
Sales Tax Expense.............................................................. 90
Sales........................................................................... 1,590
d. Cash .................................................................................... 1,590
Sales........................................................................... 1,500
Sales Taxes Payable .................................................. 90
5
Chapter
Current Liabilities 11
87. Tim's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted
to the state government monthly, what entry will Tim's Pharmacy make to show the March
remittance?
a. Sales Tax Expense.............................................................. 600
Cash ........................................................................... 600
b. Sales Taxes Payable........................................................... 600
Cash ........................................................................... 600
c. Sales Tax Expense.............................................................. 600
Sales Taxes Payable .................................................. 600
d. No entry required.
88. Langer Company does not ring up sales taxes separately on the cash register. Total receipts
for February amounted to $28,600. If the sales tax rate is 4%,
what amount must be remitted to the state for February's sales taxes?
a. $1,144 b. $1,100 c. $1,716 d. It cannot be determined.
89. Any balance in an unearned revenue account is reported as a(n)
a. current liability. b. long-term debt. c. revenue. d. unearned liability.
90. Stanley Company typically sells subscriptions on an annual basis, and publishes six times a
year. The magazine sells 60,000 subscriptions in January at $15 each.
What entry is made in January to record the sale of the subscriptions?
a. Subscriptions Receivable..................................................... 900,000
Subscription Revenue ................................................. 900,000
b. Cash ..................................................................................... 900,000
Unearned Subscription Revenue................................. 900,000
c. Subscriptions Receivable..................................................... 150,000
Unearned Subscription Revenue................................. 150,000
d. Prepaid Subscriptions .......................................................... 900,000
Cash ............................................................................ 900,000
6
Chapter
Current Liabilities 11
91. Milton Company issued a four-year interest-bearing note payable for $300,000 on January
1, 2007. Each January the company is required to pay $75,000 on the note.
How will this note be reported on the December 31, 2008 balance sheet?
a. Long-term debt, $300,000.
b. Long-term debt, $225,000.
c. Long-term debt, $150,000; Long-term debt due within one year, $75,000.
d. Long-term debt, $225,000; Long-term debt due within one year, $75,000.
92. Janis Knot has a large consulting practice. New clients are required to pay one-half of the
consulting fees up front. The balance is paid at the conclusion of the consultation.
How does Knot account for the cash received at the end of the engagement?
a. Cash
Unearned Consulting Revenue
b. Cash
Earned Consulting Revenue
c. Prepaid Consulting Fees
Earned Consulting Revenue
d. No entry is required when the engagement is concluded.
Answers
71 d 79 b 87 b
72 d 80 d 88 b
73 d 81 d 89 a
74 c 82 b 90 b
75 b 83 b 91 c
76 a 84 d 92 b
77 a 85 b
78 c 86 d
