Horngrens Accounting

TEST BANK

Don Smith

Horngren’s Accounting Volume 2 (Chapter 11-18) Twelfth Canadian Edition

Tracie L. Miller-Nobles

Brenda Mattison

Grant Mowbray

Carol A Meissner

Jo-Ann L. Johnston

Peter R. Norwood

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1 Copyright © 2023 Pearson Canada Inc.Horngren's Accounting, Vol. 2, Cdn. Ed., 12e (Miller-Nobles) Chapter 11 Current Liabilities and Payroll

11.1 Account for current liabilities of a known amount

1) Accrued interest on a note payable should be credited to interest payable.

Answer: TRUE

Diff: 1 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Procedural

Cognitive Taxon: Apply

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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

5) Current portion of long-term debt refers to the amount of principle on a note payable that must be paid within a year or an operating cycle.

Answer: TRUE

Diff: 2 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember 2 / 4

2 Copyright © 2023 Pearson Canada Inc.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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Understand

7) Sales tax payable is recorded as a debit when recording a sale of merchandise.

Answer: FALSE

Diff: 1 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Understand

8) The failure to record an accrued liability causes a company to overstate its net income.

Answer: TRUE

Diff: 3 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Conceptual

Cognitive Taxon: Understand

9) The only way to reduce a current liability is to pay out cash.

Answer: FALSE

Diff: 2 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Conceptual

Cognitive Taxon: Understand

10) Operating lines of credit are popular because they do not carry any interest charges.

Answer: FALSE

Diff: 2 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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3 Copyright © 2023 Pearson Canada Inc.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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Conceptual

Cognitive Taxon: Understand

12) Notes payable normally require the borrower to pay interest.

Answer: TRUE

Diff: 2 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Procedural

Cognitive Taxon: Apply

14) The rate of provincial sales taxes is the same in every province.

Answer: FALSE

Diff: 1 Type: TF

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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

CPA Competency: 1.2.2 Evaluates treatment for routine transactions

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

Knowledge Taxon: Factual

Cognitive Taxon: Remember

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