Question

Airport Software Ltd. includes an 5% sales tax in the amount credited to the sales account. If the sales account has a balance of $675,250, the amount of the sales tax payable to the government is: O A. $29,347 O B. $32,155 OC. $29,450 OD. $33,763

Answer 1

Calculation of sales tax payable to the government. Sales Tax Payable = Sales Account Balance 50 1.05 $675250 -x5% = 1.05 = $643095x5% = $32155 The correct option is B. The statement is false. A contingent liability is a part of liability. It is a type of liability which may arise, it is uncertain. There are many types of contingent liability like Law case, a change in govt. policy, product warranty, etc. It is future liability whose occurrence depends on the happening of a future uncertain event. Accounting treatment of contingent liabilities.

Accounting treatment of contingent liabilities. Contingency Probable Resonably Possible Remote Estimable Not estimable Disclose liability in notes No disclosure Record and disclose liabilty Disclose liability in notes It is necessary to record the contingent liability when there is a probability that the event or loss may occur and when we can reasonably estimate the amount of the loss occurred. The contingency is required disclosure in the financial statement footnote when it is reasonably possible but not probable. There is no need to record or reveal the contingent liability if the chances of its occurrence are remote.

The correct option is C. Accrued interest on short term note payable is an interest that becomes due from last interest payment date but remains unpaid at the end of an accounting period. It is recorded when it is incurred. It is recorded by debiting interest expense and crediting interest payable. When it is paid in the next accounting period the entry will be passed by debiting interest payable and crediting cash. The statement is true. Accrued interest on short term note payable is an interest that becomes due from last interest payment date but remains unpaid at the end of an accounting period. It is recorded when it is incurred. The adjusting entry to accrue interest expense on notes payable is recorded by debiting interest expense and crediting interest payable.