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Homework answers / question archive / Sales A) taxes collected by a retailer are recorded by crediting Sales Taxes Payable
Sales A) taxes collected by a retailer are recorded by crediting Sales Taxes Payable. ) crediting Sales Tax Revenue C) D) debiting Sales Tax Expense 12. The payment of a liability A) decreases assets and liabilities. C) increases assets and decreases liabilities D) decreases assets and increases liabilities 13. Closing entries: A) cause the revenue and expense accounts to have zero balances B) are prepared before the financial statements. C) summarize the activity in every account D) reduce the number of permanent accounts 14. A company that receives money in advance of performing a service A) debits Cash and credits Prepaid Insurance. B) debits Cash and credits Accounts Receivable. C) debits Uncarned Service Revenue and credits Accounts Payable D) debits Cash and credits Unearned Service Revenue. 15. The acquisition of land by issuing common stock is A) a cash transaction and would be reported in the body of a statement of cash flows. B) only reported if the statement of cash flows is prepared using the direct method. C) a noncash transaction that is not reported in the body of a statement of cash flows. D) a noncash transaction and would be reported in the body of a statement of cash flows.
Answer 11:
A. Crediting sales taxes payable
Reason: When sales tax is collected from the customer, it is liability of the business to pay that to the government. So, it is credited and create liability for the business in the name of sales taxes payable.
Answer 12:
A.decreases assets and liabilities
Reason: When liability is paid, it reduces cash asset of the company. So, asset decreases , and at the same time because liability is paid, liability will also decrease.
Answer 13:
A. Cause the revenue and expense accounts to have zero balance.
Reason: These account balances do not roll over into the next period after closing. The closing process reduces revenue, expense, and dividends account balances (temporary accounts) to zero so they are ready to receive data for the next accounting period.
Answer 14:
D. Debits cash and credits Unearned Service Revenue
Reason: When cash is received, it increases asset so cash will be debited. As services are not performed yet, but money is received, so it creates liability for the company in the name of unearned service revenue. Because that services revenue is received but not earned.
Answer 15:
C. A non cash transaction that is not reported in the body of a statements if cash flows.
Reason: As cash is not involved in the given transaction, so it is a non cash transaction. As it is non cash transaction, it will not be recorded in cash flow statement.
