Accounting Chapter 11

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer. a. True. b. False.

a. True.

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.

b. a current liability.

Advances from customers are classified as a(n) a. revenue. b. expense. c. current asset. d. current liability.

d. current liability.

A current liability is a debt that can reasonably be expected to be paid a. within one year or the operating cycle, whichever is longer. b. between 6 months and 18 months. c. out of currently recognized revenues. d. out of cash currently on hand.

a. within one year or the operating cycle, whichever is longer.

Watunga County Bank agrees to lend Hoffman Granite Company $600,000 on January 1. Hoffman Granite Company signs a $600,000, 8%, 9-month note. The entry made by Hoffman Granite on January 1 to record the proceeds and issuance of the note is a. Interest Expense 36,000 Cash. 564,000 Notes Payable 600,000 b. Cash 600,000 Notes Payable 600,000 c. Cash 600,000 Interest Expense 36,000 Notes Payable 636,000 d. Cash 600,000 Interest Expense 36,000 Notes Payable 600,000 Interest Payable 36,000

b. Cash 600,000 Notes Payable 600,000

The higher the sales tax rate, the more profit a retailer can earn. a. True. b. False.

b. False.

A company receives $396, of which $36 is for sales tax. The journal entry to record the sale would include a a. debit to cash for $36. b. credit to Sales Taxes Payable for $36. c. debit to Sales Revenue for $396. d. debit to Cash for $360.

b. credit to Sales Taxes Payable for $36.

As interest is recorded on an interest-bearing note, the Interest Expense account is a. increased; the Notes Payable account is increased. b. increased; the Notes Payable account is decreased. c. increased; the Interest Payable account is increased. d. decreased; the Interest Payable account is increased.

c. increased; the Interest Payable account is increased.

Unearned Rent Revenue is a. a contra account to Rent Revenue. b. a revenue account. c. reported as a current liability. d. debited when rent is received in advance.

c. reported as a current liability.