You and several classmates are studying for the next accounting examination. The

Question

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. $62,482.)

1. If cash is borrowed on a $50,200, 10-month, 10% note on August 1, how much interest expense would be incurred by December 31?_______$ $

2. The cash register total including sales taxes is $41,160, and the sales tax rate is 5%. What is the sales taxes payable?______$ $

3. If $41,160 is collected in advance on November 1 for 5-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31?______$

Explanation / Answer

1. If cash is borrowed on a $50,200, 10-month, 10% note on August 1, how much interest expense would be incurred by December 31?_______$

Solution: Interest = loan amount * interest * 5months / 12months
here, 5months = from August 1st to december 31st.

= 50,200 * 10% * 5 / 12 = 2091.666 = $2092 rounded off

2. The cash register total including sales taxes is $41,160, and the sales tax rate is 5%. What is the sales taxes payable?______$

Solution: $41,160 = 105% of Sales
$41,160 / 1.05 = Sales
$39,200 = Sales

$41,160 Total minus $39,200 Sales = $1,960 Sales Taxes

3. If $41,160 is collected in advance on November 1 for 5-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31?______$

Solution: $41,160 x 2/5 = $16,464 revenue earned.

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