Test Bank For Accounting Volume 2 Canadian 9th Edition Horngren

Accounting, Vol. 2, 9e Cdn. Ed. (Horngren) Chapter 11 Current Liabilities and Payroll

Objective 11-1

1) Accrued interest on a note payable should be credited to interest payable. Answer: TRUE
Diff: 1 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

2) Interest payable is a contra liability account and is deducted from the note payable on the balance sheet.
Answer: FALSE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

3) A $45,000, 10%, 90-day note payable comes to maturity. The amount to be paid at maturity including interest is $43,890.41.
Answer: FALSE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application
Objective: 11-1 Account for current liabilities of known amount

4) An unearned revenue arises when a company receives cash from its customers in advance of earning the revenue.
Answer: TRUE
Diff: 1 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

5) Current portion of long-term debt refers to the amount of principle on a note payable that must be paid within a year.
Answer: TRUE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

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6) The entry to record unearned revenue received in advance includes a debit to unearned revenue and a credit to cash.
Answer: FALSE
Diff: 1 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

7) Sales tax payable is recorded as a debit when recording a sale of merchandise. Answer: FALSE
Diff: 1 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

8) The failure to record an accrued liability causes a company to overstate its net income. Answer: TRUE
Diff: 3 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Comprehension
Objective: 11-1 Account for current liabilities of known amount

9) The only way to reduce a current liability is to pay out cash. Answer: FALSE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Comprehension

Objective: 11-1 Account for current liabilities of known amount

10) Operating lines of credit are popular because they do not carry any interest charges. Answer: FALSE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

11) Interest must be accrued on all current notes payable. For long-term notes the interest is accrued at the maturity of the note.
Answer: FALSE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

12) Notes payable normally require the borrower to pay interest. Answer: TRUE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

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13) A $15,000, 8%, 9-month note payable requires an interest payment of $900 at maturity, if no interest was previously paid.
Answer: TRUE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application
Objective: 11-1 Account for current liabilities of known amount

14) The rate of provincial sales taxes is the same in every province. Answer: FALSE
Diff: 1 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

15) The Federal Government collects all the PST and GST for the country and then passes on the collection of the PST to the individual provincial governments.
Answer: FALSE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

16) Most lines of credit are payable on demand.
Answer: TRUE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

17) The province of Alberta has the lowest PST rate in Canada of 3%. Answer: FALSE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

18) The methods of recording GST and HST are similar.
Answer: TRUE
Diff: 1 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

19) In some provinces individual consumers must pay both HST and PST. Answer: FALSE
Diff: 1 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

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20) In provinces with PST, businesses must pay the tax when they are the final consumer of the goods. Answer: TRUE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

21) Secured operating lines of credit normally have lower rates of interest than unsecured operating lines of credit.
Answer: TRUE
Diff: 2 Type: TF

Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

22) Long-term debt refers to obligations that have to be paid within a year of the balance sheet date. Answer: FALSE
Diff: 2 Type: TF
Learning Outcome: A-12 Define and record current and contingent liabilities

Skill: Knowledge
Objective: 11-1 Account for current liabilities of known amount

23) Which of the following liabilities creates no expense on the part of the company? A) Employment Insurance payable
B) Canada Pension Plan payable
C) GST payable

D) estimated warranty payable
Answer: C
Diff: 2 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

24) When a company issues a short-term note payable: A) the note payable account is credited.
B) the note payable is debited.
C) the interest expense is credited.

D) the interest expense account is debited.
Answer: A
Diff: 1 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

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25) Unearned revenue represents revenue that has: A) been earned and collected.
B) been earned but not yet collected.
C) been collected but not yet earned.

D) not been collected nor earned.
Answer: C
Diff: 1 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

26) Sales revenue for Joe’s Sporting Goods for the current period amounted to $215,000. Joe’s Sporting Goods records GST when merchandise is sold. All sales are on account. The GST rate is 5%. The journal entry would include a debit to:
A) Accounts Receivable for $215,000.

B) Accounts Receivable for $225,750. C) GST Payable for $10,750.
D) Sales Revenue for $215,000. Answer: B

Diff: 2 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application
Objective: 11-1 Account for current liabilities of known amount

27) Amounts owed to suppliers for products or services purchased on open accounts are called: A) notes payable.
B) unearned revenues.
C) accounts payable.

D) accrued expenses.
Answer: C
Diff: 1 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Knowledge

Objective: 11-1 Account for current liabilities of known amount

Table 11-1

A $10,000, 90-day, 12% note payable was issued on November 1, 2013.

28) Referring to Table 11-1, what is the amount of the accrued interest on December 31, 2013? A) $394.52
B) $95.34
C) $101.92

D) $197.26
Answer: D
Diff: 2 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application
Objective: 11-1 Account for current liabilities of known amount

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29) Referring to Table 11-1, what is the amount of interest expense recorded in 2014? A) $98.63
B) $193.97
C) $101.92

D) $120.00
Answer: A
Diff: 2 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application
Objective: 11-1 Account for current liabilities of known amount

30) Referring to Table 11-1, the entry on the maturity date would include a: A) credit to Interest Payable for $98.63.
B) debit to Interest Expense for $98.63.
C) credit to Note Payable for $10,295.89.

D) credit to Cash for $10,000.
Answer: B
Diff: 2 Type: MC
Learning Outcome: A-12 Define and record current and contingent liabilities Skill: Application

Objective: 11-1 Account for current liabilities of known amount