Chapter 11: Q13RQ (page 604)
What is a contingent liability? Provide some examples of contingencies.
Contingent liabilities are potential but not actual and depend upon some future event.
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Watson Publishing completed the following transactions during 2018: Oct. 1 Sold a six-month subscription (starting on November 1), collecting cash of $240, plus sales tax of 8%. Nov. 15 Remitted (paid) the sales tax to the state of Tennessee. Dec. 31 Made the necessary adjustment at year-end to record the amount of subscription revenue earned during the year. Journalize the transactions (explanations are not required). Round to the nearest dollar.
Consider the following transactions of Sapphire Software: Mar. 31 Recorded cash sales of $230,000, plus sales tax of 7% collected for the state of New Jersey. Apr. 6 Sent March sales tax to the state. Journalize the transactions for the company. Ignore cost of goods sold.
The income statement for California Communications follows. Assume California Communications signed a 3-month, 9%, $3,000 note on June 1, 2018, and that this was the only note payable for the company.
Requirements
1. Fill in the missing information for California’s year ended July 31, 2018, income statement. Round to the nearest dollar.
2. Compute the times-interest-earned ratio for the company. Round to two decimals.
On August 10, Swanson Company recorded sales of merchandise inventory on account, \(4,000. The sales were subject to sales tax of 4%. The company uses the perpetual inventory system. On September 30, Swanson paid \)500 of sales tax to the state.
1. Journalize the transaction to record the sale on August 10. Ignore cost of goods sold.
: On June 1, Hunting Man Magazine collected cash of $63,000 on future annual subscriptions starting on July 1. Requirements
1. Journalize the transaction to record the collection of cash on June 1.
2. Journalize the transaction required at December 31, the magazine’s year-end, assuming no revenue earned has been recorded. (Round adjustment to the nearest whole dollar.)
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