Question

Do It! Review 10-1

You and several classmates are studying for the next accounting examination. They ask you to answer the following questions: (Round answers to 0 decimal places, e.g. 125.)

1. If cash is borrowed on a $83,000, 9-month, 6% note on August 1, how much interest expense would be incurred by December 31?

Interest expense

$

2. The cash register total including sales taxes is $37,450, and the sales tax rate is 7%. What is the sales taxes payable?

Sales taxes payable

$

3. If $59,100 is collected in advance on November 1 for 6-month magazine subscriptions, what amount of subscription revenue should be recognized by December 31?

Subscription revenue

$

Answer 1

Answer 1. $2,075

A.	Principal	$83,000
B.	Interest rate	6%
C.	Tenure months	9
D.	Monthly interest expense ( A*B)/12	$415
E.	Months From (August - December )	5
F.	Interest expenses   by December (D*E)	$2,075

Answer B. $2,450

A	Cash register including sales tax	$37,450
B.	Sales tax rate %	7
C.	Sales tax payable	$2,450.00	37450/107*7

Answer C.

Revenue recognized by December 31.

A.	Advance money received on November 1	$59,100
B.	Total months of subscription	6
C.	Monthly revenue ( B/A)	$9,850
D.	Revenue recognized by December 31 ( 2 months) ( C*2)	$19,700