PT Missed Questions over All Topics Flashcards
During the current year, Casual Wear Co. had total retail sales of $800,000 and collected a 5% state sales tax on all sales. At the end of they prior year, Casual Wear had $4,500 in sales taxes that had not been remitted to the state authorities. During the current year, Casual Wear remitted $39,500 in state sales tax. What amount should be recorded in Casual Wear’s current year financial statements?
$5,000 in sales tax payable
Beg. Balance in sales tax payable is $4,500. Current year increase to sales tax payable is $40,000 ($800,000 x 5%) . $39,500 of it was paid.
40,000 - 39,500 = 500
Add the 500 to 4,500 and you get $5,000 in total sales tax payable
Which best describes a characteristic of the modified accrual accounting method used for government entities including the general fund?
A. Governmental fund revenues are recorded on the accrual basis if they are measurable.
B. Receivables are recorded net of bad debt expense under modified accrual accounting
C. Expenditures for capital items are always depreciated
D. Emphasis is on flow of current financial resources, which is very close to cash flow
D. Emphasis is on flow of current financial resources, which is very close to cash flow.
Modified accrual accounting is based on the flow of current resources approach, which is very close to cash flow