(Test Bank) Intermediate Accounting Canadian Edition Volume 2

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Test Bank

13th Edition

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Test Bank for Intermediate Accounting Canadian Edition Volume 2, The downloadable file consists of 775 pages, and the total size of the file is 5.05 MB. Purchase now only for highly discounted price.

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Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-1 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited CHAPTER 13 NON-FINANCIAL AND CURRENT LIABILITIES CHAPTER STUDY OBJECTIVES 1. Understand the importance of non-financial and current liabilities from a business perspective. Cash flow management is a key control factor for most businesses. Taking advantage of supplier discounts for prompt payment is one step companies can take. Control of expenses and related accounts payable can improve the efficiency of a business, and can be particularly important during economic downturns. 2. Define liabilities, distinguish financial liabilities from other liabilities, and identify how they are measured. Liabilities are defined as an obligation of an entity arising from past transactions or events that are settled through a transfer of economic resources in the future. The entity should have little (or no) ability to avoid the duty or responsibility. Financial liabilities are a subset of liabilities. They are contractual obligations to deliver cash or other financial assets to another party, or to exchange financial assets or liabilities with another party under conditions that are potentially unfavourable. Financial liabilities are initially recognized at fair value, and subsequently either at amortized cost or fair value. ASPE does not specify how non-financial liabilities are measured. However, unearned revenue is generally measured at the fair value of the goods or services to be delivered in the future, while others are measured at the best estimate of the resources needed to settle the obligation. Under IFRS, non-financial liabilities other than unearned revenue are measured at the best estimate of the amount the entity would rationally pay at the date of the SFP to settle the present obligation. 3. Define current liabilities and identify and account for common types of current liabilities. Current liabilities are obligations that are payable within one year from the date of the SFP or within the operating cycle if the cycle is longer than a year. IFRS also includes liabilities held for trading and any obligation where the entity does not have an unconditional right to defer settlement beyond 12 months after the date of the SFP. There are several types of current liabilities. The most common are accounts and notes payable, and payroll-related obligations. 4. Identify and account for the major types of employee-related liabilities. Employee-related liabilities include (1) payroll deductions, (2) compensated absences, and (3) profit-sharing and bonus agreements. Payroll deductions are amounts that are withheld from employees and result in an obligation to the government or another party. The employer’s matching contributions are also included in this obligation. Compensated absences earned by employees are company obligations that are recognized as employees earn an entitlement to them, as long as they can be reasonably measured. Bonuses based on income are accrued as an expense and liability as the income is earned. Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-2 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited 5. Explain the recognition, measurement, and disclosure requirements for decommissioning and restoration obligations. A decommissioning, restoration, or asset retirement obligation (ARO) is an estimate of the costs a company is obliged to incur when it retires certain assets. It is recorded as a liability and is usually long term in nature. Under ASPE, only legal obligations are recognized. They are measured at the best estimate of the cost to settle them at the date of the SFP, and the associated cost is included as part of the cost of property, plant, and equipment. Under IFRS, both legal and constructive obligations are recognized. They are measured at the amount the entity would rationally pay to be relieved of the obligation, and are capitalized as part of property, plant, and equipment or to inventory, if due to production activities. Over time, the liability is increased for the time value of money and the asset costs are amortized to expense. Entities disclose information about the nature of the obligation and how it is measured, with more disclosures required under IFRS than ASPE. 6. Explain the issues and account for product guarantees, other customer program obligations, and unearned revenue. Historically, an expense approach has been used to account for the outstanding liability, and this type of approach is still used for assurance-type warranties, as initially discussed in Chapter 6. More recently, standards such as IFRS 15 have moved to a revenue approach for warranties that are not included in the sales price of the product (that is, for service-type warranties). Under the expense approach, the outstanding liability is measured at the cost of the economic resources needed to meet the obligation. The assumption is that, along with the liability that is required to be recognized at the reporting date, the associated expense needs to be measured and matched with the revenues of the period. Under the revenue approach, the outstanding liability is measured at the value of the obligation. The proceeds received for any goods or services yet to be delivered or performed are considered to be unearned revenue at the point of sale. Until the revenue is earned, the obligation—the liability—is reported at its sales or fair value. The liability is then reduced as the revenue is earned. More generally, when an entity receives proceeds in advance or for multiple deliverables, unearned revenue is recognized to the extent the entity has not yet performed. This is measured at the fair value of the remaining goods or services that will be delivered. When costs remain to be incurred in revenue transactions where the revenue is considered earned and has been recognized, estimated liabilities and expenses are recognized at the best estimate of the expenditures that will be incurred. This is an application of the matching concept. 7. Explain and account for contingencies and uncertain commitments, and identify the accounting and reporting requirements for guarantees and commitments. Under existing standards, a loss is accrued and a liability recognized if (1) information that is available before the issuance of the financial statements shows that it is likely (or more likely than not under IFRS) that a liability has been incurred at the date of the financial statements, and (2) the loss amount can be reasonably estimated (under IFRS, it would be a rare situation where this could not be done). Some minor changes are under consideration by the IASB as described in the Looking Ahead section of the chapter. Guarantees in general are accounted for similarly to contingencies. Commitments, or contractual obligations, do not usually result in a liability at the date of the SFP. Information about specific types of outstanding commitments is reported at the date of the SFP. 8. Indicate how non-financial and current liabilities are presented and analyzed. Current liability Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-3 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited accounts are commonly presented as the first classification in the liability section of the SFP, although under IFRS, an alternative presentation is to present current assets and liabilities at the bottom of the statement. Within the current liability section, the accounts may be listed in order of their maturity or in order of their liquidation preference. IFRS requires information about and reconciliations of any provisions. Additional information is provided so that there is enough to meet the requirement of full disclosure. Information about unrecognized loss contingencies is reported in notes to the financial statements, including their nature and estimates of possible losses. Commitments at year end that are significant in size, risk, or time are disclosed in the notes to the financial statements, with significantly more information required under IFRS. Three common ratios used to analyze liquidity are the current, acid-test, and days payables outstanding ratios. 9. Identify differences in accounting between IFRS and ASPE, and what changes are expected in the near future. In June 2015, a Staff Paper on the Research—Provisions, Contingent Liabilities and Contingent Assets (IAS 37) project was published. In 2020, as a follow-up, the IASB limited its study to matters such as aligning the definition of a liability and requirements for identifying liabilities in IAS 37 with updates in the Conceptual Framework for Financial Reporting, which became effective in 2020. Other goals are to clarify the costs to include in the measure of a provision and to specify whether the rates used by entities to discount provisions should reflect their own credit risk. Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-4 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited MULTIPLE CHOICE QUESTIONS Answer No. Description c 1. Essential characteristics of liabilities c 2. Constructive obligation b 3. Recognition and accounting for financial liabilities b 4. Non-financial liabilities a 5. Classification of notes payable d 6. Zero-interest-bearing notes c 7. Refinancing of long-term debts b 8. Identify item that is not a current liability c 9. Identify the current liability. d 10. Classification of stock dividends distributable a 11. Goods and Services Tax b 12. Identify current liability c 13. Accounting for GST a 14. Provincial sales tax b 15. Corporation income tax a 16. Knowledge of accounts payable b 17. Adjusting entry for zero-interest-bearing note d 18. Journal entry for payment of interest-bearing note b 19. Determine amount of short-term debt to be reported d 20. Determine amount of short-term debt to be reported b 21. Calculate accounts receivable including sales taxes c 22. Calculate cost of purchase for own use d 23. Payment of GST c 24. Adjusting entry for corporate income tax d 25. Determine amount of short-term debt to be reported c 26. Calculate accrued interest payable c 27. Calculate HST collected d 28. Calculate a zero-interest-bearing note a 29. Calculate interest on a zero-interest-bearing note d 30. Current liabilities in general – determine false statement c 31. Determine employer’s payroll costs b 32. Recording payroll expenses – ASPE b 33. Accumulating rights to benefits c 34. Accrual of liability for compensated absences b 35. Non-accumulating rights to benefits d 36. Methods of calculating employee bonuses b 37. Calculate payroll tax expense b 38. Calculate vacation pay expense to be reported c 39. Calculate accrued vacation pay liability b 40. Calculate net pay a 41. Calculate accrued salaries payable b 42. Accrual of payroll taxes d 43. Total source deductions owing Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-5 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited Answer No. Description c 44. Definition of a provision d 45. Recognition of an asset retirement obligation c 46. Recognition of an asset retirement obligation a 47. Recording accretion expense for ARO d 48. Entry for asset retirement obligation b 49. Entry for asset retirement obligation accretion b 50. Calculate asset retirement obligation a 51. Accounting for asset retirement obligations – IFRS b 52. Accounting for asset retirement obligations – ASPE c 53. Revenue approach for product guarantees d 54. Determine false statement regarding warranties b 55. Accounting for premiums and coupons d 56. IFRS re customer loyalty programs c 57. Adjusting entry for unearned revenue b 58. Determine current and long-term portions of debt a 59. Expense approach to warranty a 60. Revenue approach to warranty c 61. Calculate warranty liability (expense approach) a 62. Calculate liability for unredeemed coupons b 63. Calculate unearned service contract revenue c 64. Calculate liability from unredeemed trading stamps b 65. Service-type warranty liability a 66. Account for warranty liability c 67. Recognition of contingencies (ASPE) a 68. Recognition of contingencies (IFRS) d 69. Accrual of contingent liability c 70. Disclosure of commitments d 71. Determine range of loss accrual b 72. Determine amount to accrue as a loss contingency d 73. Determine amount to accrue as a gain contingency d 74. Determine uncertain liabilities d 75. Contingent gains d 76. Acid-test ratio elements c 77. Days payable outstanding elements c 78. Calculate quick (acid-test) ratio d 79. Calculate current ratio c 80. Calculate quick ratio a 81. Calculate days payables outstanding b 82. Essential characteristics of liabilities EXERCISES Item Description E13-85 Non-financial versus financial liabilities E13-86 Interest-bearing note E13-87 Zero-interest-bearing note Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-6 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited E13-88 Notes payable E13-89 Sales taxes E13-90 Income taxes payable E13-91 Payroll entries E13-92 Compensated absences E13-93 Compensated absences E13-94 Asset retirement obligation – ASPE E13-95 Asset retirement obligation – IFRS E13-96 Product guarantee and expense approach E13-97 Product guarantee and cash basis method E13-98 Premiums E13-99 Premiums E13-100 Contingent liabilities PROBLEMS Item Description P13-101 Common types of current liabilities P13-102 Accounts and notes payable P13-103 Presentation of short-term debt P13-104 Refinancing of short-term debt P13-105 Payroll deduction entries P13-106 Employee-related liabilities P13-107 Asset retirement obligation – IFRS P13-108 Asset retirement obligation – ASPE P13-109 Premiums: expense versus revenue approach P13-110 Premiums: multi-years P13-111 Warranties P13-112 Unredeemed coupons P13-113 Contingencies Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-7 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited MULTIPLE CHOICE QUESTIONS 1. According to the new Conceptual Framework and under ASPE in the CPA Canada Handbook Part II, which of the following is NOT an essential characteristic of a liability? a) It embodies a duty or responsibility. b) The transaction or event that obliges the entity has occurred. c) The obligation is enforceable on the other party. d) The entity has little or no discretion to avoid the duty. Answer: c Difficulty: Easy Learning Objective: Define liabilities, distinguish financial liabilities from other liabilities, and identify how they are measured. Section Reference: Recognition and Measurement CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 2. A constructive obligation arises when a) the entity is legally obligated to honour the obligation. b) the entity makes an unconditional promise to pay money in the future. c) past or present company practice reveals the entity acknowledges a potential economic burden. d) the entity has a conditional obligation which becomes unconditional if an uncertain future event occurs. Answer: c Difficulty: Easy Learning Objective: Define liabilities, distinguish financial liabilities from other liabilities, and identify how they are measured. Section Reference: Recognition and Measurement CPA: Financial Reporting Bloomcode: Comprehension AACSB: Analytic 3. Which of the following statements is NOT true about recognition and subsequent accounting for financial liabilities? a) They are initially recognized at their fair value. b) After acquisition, they continue to be accounted for at fair value. c) After acquisition, they are generally accounted for at amortized cost. d) Short-term liabilities, such as accounts payable, are usually recorded at their maturity value. Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-8 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited Answer: b Difficulty: Easy Learning Objective: Define liabilities, distinguish financial liabilities from other liabilities, and identify how they are measured. Section Reference: Recognition and Measurement CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 4. Which of the following characteristics of non-financial liabilities is NOT correct? a) The exact timing of these obligations is generally not known. b) Non-financial obligations are generally easier to measure. c) Non-financial obligations are subject to different measurement standards than financial obligations. d) Non-financial obligations are satisfied with goods and services. Answer: b Difficulty: Easy Learning Objective: Define liabilities, distinguish financial liabilities from other liabilities, and identify how they are measured. Section Reference: Recognition and Measurement CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 5. Among Oslo Corp.’s short-term obligations, on its most recent statement of financial position date, are notes payable totaling $250,000 with the Provincial Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on Oslo’s statement of financial position as a) current liabilities. b) deferred charges. c) long-term liabilities. d) shareholders’ equity. Answer: a Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Application AACSB: Analytic Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-9 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited 6. Regarding zero-interest-bearing notes, a) they do not have an interest component. b) the debtor receives the future value of the note and pays back the present value. c) any interest is never recognized until the note is repaid. d) the debtor receives the present value of the note and pays back the future value. Answer: d Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 7. Under IFRS, even if the entity plans to refinance long-term debt, the current portion must be reported as a current liability UNLESS a) long-term financing has been completed after the statement of financial position date, but before the financial statements are released. b) management intends to refinance the debt on a long-term basis. c) at the statement of financial position date, the entity expects to refinance under an existing agreement for at least a year, and the decision is solely at its discretion. d) management intends to discharge the debt by issuing shares. Answer: c Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 8. Which of the following should NOT be included in the current liabilities section of the statement of financial position? a) trade accounts payable b) current portion of long-term debt to be retired by non-current assets c) short-term zero-interest-bearing notes payable d) a liability due on demand (callable debt) Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-10 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited Answer: b Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Comprehension AACSB: Analytic 9. Which of the following is a current liability? a) preferred dividends in arrears b) stock dividends distributable c) preferred cash dividends payable d) stock splits Answer: c Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 10. Stock dividends distributable should be classified on the a) income statement as an expense. b) statement of financial position as an asset. c) statement of financial position as a liability. d) statement of financial position as an item of shareholders' equity. Answer: d Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 11. Goods and Services Tax (GST) Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-11 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited a) is a value added tax. b) is a sales tax charged by each province on all taxable goods. c) in some provinces, is an income tax. d) must be collected by all businesses in Canada. Answer: a Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 12. Which of the following may be classified as a current liability? a) stock dividends distributable b) accounts receivable credit balances c) losses expected to be incurred within the next 12 months in excess of the company's insurance coverage d) tenant’s rent deposit not returnable until the end of a long-term lease Answer: b Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Comprehension AACSB: Analytic 13. Accounting for GST includes a) crediting GST Payable to record GST paid on inventory for resale. b) crediting GST Receivable to record GST collected from customers. c) debiting GST Receivable to record GST paid to suppliers. d) debiting GST Payable to record GST collected from customers. Answer: c Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-12 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 14. Regarding Provincial Sales Tax (PST), a) the purchaser includes any PST paid in the cost of the goods or services. b) all PST paid is recorded in a “PST Expense” account. c) all PST paid is recorded in a “PST Recoverable” account. d) for statement of financial position presentation, a PST registrant “nets” any PST paid against any PST collected from customers. Answer: a Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 15. Corporation income taxes payable a) must always be approved by an external auditor. b) are reviewed and approved by Canada Revenue Agency (CRA). c) also apply to proprietorships and partnerships. d) are always the same under GAAP and Canadian tax laws. Answer: b Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic 16. Which of the following is generally associated with current liabilities classified as accounts payable? Periodic Payment Secured of Interest by Collateral a) No No b) No Yes Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-13 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited c) Yes No d) Yes Yes Answer: a Difficulty: Easy Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Knowledge AACSB: Analytic Feedback: Accounts payable generally are zero-interest-bearing and unsecured. 17. On November 1, 2023, France Corp. signed a three-month, zero-interest-bearing note for the purchase of $60,000 of inventory. The maturity value of the note was $60,600, based on the bank’s discount rate of 4%. The adjusting entry prepared on December 31, 2023 in connection with this note will include a a) debit to Note Payable for $400. b) credit to Note Payable for $400. c) debit to Interest Expense for $600. d) credit to Interest Expense for $200. Answer: b Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Application AACSB: Analytic Feedback: $60,000 x 4% x 2 ÷ 12 = $400 18. On December 1, 2023, Ruby Ltd. borrowed $180,000 from its bank, by signing a four-month, 5% interest-bearing note. Assuming Ruby has a December 31, year end and does NOT use reversing entries, the journal entry to record payment of this note on April 1, 2024 will include a a) credit to Note Payable of $180,000. b) debit to Interest Expense of $3,000. c) debit to Interest Payable of $2,250. d) debit to Interest Payable of $750. Answer: d Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-14 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Application AACSB: Analytic Feedback: Interest payable that would have been recorded at Dec 31/20 $180,000 x 5% x 1 ÷ 12 = $750. 19. On February 10, 2024, after issuance of its financial statements for calendar 2023, Mantack Corp. entered into a financing agreement with Friedman Bank, allowing Mantack Corp. to borrow up to $4,000,000 at any time through 2025. Amounts borrowed under the agreement bear interest at 3% above the bank's prime interest rate and mature two years from the date of the loan. Mantack presently has $1,500,000 of notes payable with Bringham Bank maturing March 15, 2024. The company intends to borrow $2,500,000 under the agreement with Friedman and pay off the notes payable to Bringham. The agreement with Friedman also requires Mantack to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common shares without prior approval by Friedman. From the above information only, the total short-term debt of Mantack Corp. on the December 31, 2023 statement of financial position is a) $0. b) $1,500,000. c) $2,500,000. d) $4,000,000. Answer: b Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Analysis AACSB: Analytic Feedback: $1,500,000 (No agreement in place at year end.) 20. On December 31, 2023, Gumble Ltd. has $3,150,000 in short-term notes payable due on February 14, 2024. On January 10, 2024, Gumble arranged a line of credit with Caldi Bank, which allows Gumble to borrow up to $2,000,000 at 2% above the prime rate for three years. On February 2, 2024, Gumble borrowed $1,400,000 from Caldi Bank and used $600,000 additional cash to liquidate $2,000,000 of the short-term notes payable. Assuming Gumble adheres to IFRS, the amount of the short-term notes payable that should be reported as current liabilities on Gumble’s December 31, 2023 statement of financial position (to be issued on March 5, 2024) is a) $0. Test Bank for Intermediate Accounting, Thirteenth Canadian Edition 13-15 Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited b) $600,000. c) $1,400,000. d) $3,150,000. Answer: d Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Analysis AACSB: Analytic Feedback: $3,150,000 (No agreement in place at year end.) 21. Mason Corp. operates in a province with 8% PST. The store must also collect 5% GST on all sales. For the month of May, Mason sold $120,000 worth of goods to customers, 40% of which were cash sales and the balance being on account. Based on the above information, what is the total debit to accounts receivable for the month of May? a) $72,000 b) $81,360 c) $54,240 d) $35,600 Answer: b Difficulty: Medium Learning Objective: Define current liabilities and identify and account for common types of current liabilities. Section Reference: Common Current Liabilities CPA: Financial Reporting Bloomcode: Application AACSB: Analytic Feedback: $120,000 x 60% x 1.13 = $81,360 22. Xylex Ltd., a GST registrant, buys $6,200 worth of Supplies for their own use. The purchase is subject to 6% PST and 5% GST. What amount will be debited to the Supplies account as a result of this transaction? a) $6,200 b) $6,510 c) $6,572 d) $6,882 Answer: c