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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© 2014 Pearson Canada Inc.

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