Podcast
Questions and Answers
All of the following are reported as current liabilities except:
All of the following are reported as current liabilities except:
The relationship between current liabilities and current assets is useful in evaluating a company's:
The relationship between current liabilities and current assets is useful in evaluating a company's:
Most companies pay current liabilities:
Most companies pay current liabilities:
A current liability is a debt that can reasonably be expected to be paid:
A current liability is a debt that can reasonably be expected to be paid:
Signup and view all the answers
Liabilities are classified on the statement of financial position as current or:
Liabilities are classified on the statement of financial position as current or:
Signup and view all the answers
From a liquidity standpoint, it is more desirable for a company to have current:
From a liquidity standpoint, it is more desirable for a company to have current:
Signup and view all the answers
The relationship of current assets to current liabilities is used in evaluating a company's:
The relationship of current assets to current liabilities is used in evaluating a company's:
Signup and view all the answers
Which of the following is usually not an accrued liability?
Which of the following is usually not an accrued liability?
Signup and view all the answers
What is the correct calculation for cash paid on an interest-bearing note with a principal of £125,000 and an interest rate of 8% for 3 months?
What is the correct calculation for cash paid on an interest-bearing note with a principal of £125,000 and an interest rate of 8% for 3 months?
Signup and view all the answers
When is interest expense on an interest-bearing note recognized?
When is interest expense on an interest-bearing note recognized?
Signup and view all the answers
Which entry correctly records the payment of an interest-bearing note at maturity after recognizing all interest?
Which entry correctly records the payment of an interest-bearing note at maturity after recognizing all interest?
Signup and view all the answers
How are sales taxes collected by a retailer recorded?
How are sales taxes collected by a retailer recorded?
Signup and view all the answers
Unearned Rent Revenue is classified as what?
Unearned Rent Revenue is classified as what?
Signup and view all the answers
Sales taxes collected by retailers are recorded as a(n):
Sales taxes collected by retailers are recorded as a(n):
Signup and view all the answers
What account is debited when rent is received in advance?
What account is debited when rent is received in advance?
Signup and view all the answers
What is the formula used to calculate cash received from a note payable?
What is the formula used to calculate cash received from a note payable?
Signup and view all the answers
How much interest is charged on a $50,000 note payable at a rate of 6% over 60 days?
How much interest is charged on a $50,000 note payable at a rate of 6% over 60 days?
Signup and view all the answers
What is the interest charged on a HK$400,000 note payable at 8% over 90 days?
What is the interest charged on a HK$400,000 note payable at 8% over 90 days?
Signup and view all the answers
What is the calculated interest on a £100,000 note payable at a rate of 6% over 2 months?
What is the calculated interest on a £100,000 note payable at a rate of 6% over 2 months?
Signup and view all the answers
How is interest on a note payable typically categorized in financial statements at the end of the accounting period?
How is interest on a note payable typically categorized in financial statements at the end of the accounting period?
Signup and view all the answers
If Dakota Company issued an €800,000, 10%, nine-month note on October 1, 2020, what is the interest due by December 31, 2020?
If Dakota Company issued an €800,000, 10%, nine-month note on October 1, 2020, what is the interest due by December 31, 2020?
Signup and view all the answers
What is the interest amount for a HK$225,000 note payable at an 8% interest rate over 3 months?
What is the interest amount for a HK$225,000 note payable at an 8% interest rate over 3 months?
Signup and view all the answers
What would be the adjustment needed for accrued interest on a note payable for financial reporting?
What would be the adjustment needed for accrued interest on a note payable for financial reporting?
Signup and view all the answers
Sales taxes collected by a retailer are reported as which type of liability?
Sales taxes collected by a retailer are reported as which type of liability?
Signup and view all the answers
If a retailer's total receipts for the month are €45,990 including a 5% sales tax, what are the actual sales?
If a retailer's total receipts for the month are €45,990 including a 5% sales tax, what are the actual sales?
Signup and view all the answers
What is included in the journal entry when recording cash sales of HK$5,000 and sales taxes of HK$300?
What is included in the journal entry when recording cash sales of HK$5,000 and sales taxes of HK$300?
Signup and view all the answers
What method would you use to find the sales amount from total receipts including sales tax?
What method would you use to find the sales amount from total receipts including sales tax?
Signup and view all the answers
During March, Carver's Pharmacy collected how much in sales taxes?
During March, Carver's Pharmacy collected how much in sales taxes?
Signup and view all the answers
Which of the following best describes how a retailer should treat sales taxes collected from customers?
Which of the following best describes how a retailer should treat sales taxes collected from customers?
Signup and view all the answers
What accounting entry reflects total cash sales and sales taxes collected?
What accounting entry reflects total cash sales and sales taxes collected?
Signup and view all the answers
In accounting, how are sales taxes treated prior to being submitted to the government?
In accounting, how are sales taxes treated prior to being submitted to the government?
Signup and view all the answers
What journal entry will Carver's Pharmacy make to show the March sales tax remittance?
What journal entry will Carver's Pharmacy make to show the March sales tax remittance?
Signup and view all the answers
What amount must Dailey Company remit to the state for February's sales taxes based on €48,150 in receipts and a 7% tax rate?
What amount must Dailey Company remit to the state for February's sales taxes based on €48,150 in receipts and a 7% tax rate?
Signup and view all the answers
How is an unearned revenue balance reported on the financial statements?
How is an unearned revenue balance reported on the financial statements?
Signup and view all the answers
What journal entry does Southern Foodie Company make to record the sale of subscriptions in January?
What journal entry does Southern Foodie Company make to record the sale of subscriptions in January?
Signup and view all the answers
What is the final sales tax amount calculated for Dailey Company's total receipts in February?
What is the final sales tax amount calculated for Dailey Company's total receipts in February?
Signup and view all the answers
What will happen if Carver's Pharmacy does not properly record their sales tax remittance?
What will happen if Carver's Pharmacy does not properly record their sales tax remittance?
Signup and view all the answers
If Dailey Company's receipts do not separately account for sales taxes, how can they determine the sales tax owed?
If Dailey Company's receipts do not separately account for sales taxes, how can they determine the sales tax owed?
Signup and view all the answers
What is the classification of the amount recorded under 'Unearned Subscription Revenue'?
What is the classification of the amount recorded under 'Unearned Subscription Revenue'?
Signup and view all the answers
Study Notes
Current Liabilities Defined
- Current Liabilities are debts that are expected to be paid within one year or the operating cycle, whichever is longer
- Current Liabilities are used to evaluate a company's liquidity, or the ability to pay short-term obligations
- Current Liabilities are typically paid out of current assets, which are assets that can be converted to cash within the same timeframe
- When a company's current liabilities exceed current assets, this is a cause for concern and can lead to a liquidity crisis should they have trouble obtaining financing
Current Liabilities Examples
- Accounts Payable: Short-term debts that arise from credit purchases, including purchases of inventory and supplies
- Notes Payable: Formal written promises to pay a specific amount of money within one year or the operating cycle
- Unearned Revenues: Revenues received in advance from customers for goods or services not yet delivered
- Sales Taxes Payable: Sales taxes collected from customers and held in trust until remitted to the government
Interest-Bearing Notes
- Interest expense is usually accrued over the life of a note payable
- Interest expense is calculated by multiplying the principal of the note by the interest rate and the fraction of a year that the note was outstanding
Unearned Revenue
- Unearned revenue is a liability account representing income that has been received but not yet earned
- This account is used to track revenue that has been collected in advance for services or products not yet delivered
- As services are performed or products are delivered, the unearned revenue account is credited (decreased) and the earned revenue account is debited (increased).
- Unearned revenue accounts are normally categorized as current liabilities
Sales Taxes
- Sales taxes collected by a retailer are considered a liability, and are usually reported as a separate current liability called "Sales Taxes Payable" on the balance sheet
- Sales taxes are typically remitted to the state or local government on a periodic basis, usually monthly
- Retailers are required to collect and remit sales taxes from customers, even though they are not recognized as revenue until submitted to the government
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz covers the definition and examples of current liabilities, focusing on their importance in evaluating a company's liquidity. You'll learn about accounts payable, notes payable, unearned revenues, and sales taxes payable, and how these liabilities impact financial health.
