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Journals, Bond Interest, Advance Revenue, Sales Taxes

Fundamental Accounting Principles

Assume that a company uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. A sales return for credit on account would be recorded in the:

sales journal.
general journal.
cash receipts journal.
accounts receivable ledger.

Which of the following statements is true?

Interest on bonds is tax deductible.
Interest on bonds is not tax deductible.
Bonds do not have to be repaid.
Bonds always decrease return on equity

Advance ticket sales totaling $6,000,000 cash would be recognized as follows:

debit Sales, credit Unearned Revenue.
debit Unearned Revenue, credit Sales.
debit Cash, credit Unearned Revenue.
debit Unearned Revenue, credit Cash.

Sales taxes payable:

is an estimated liability.
is a contingent liability.
is a current liability for retailers.
is a business expense

Bonds that give the issuer an option of retiring them before they mature are:

Serial bonds.
Sinking fund bonds.
Registered bonds.
Callable bonds.

Solution Preview

Assume that a company uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. A sales return for credit on account would be recorded in the:

sales journal.
general journal.
cash receipts journal.
accounts receivable ledger.

It would be recorded in the general journal because it is none of the other three. Some might try to enter credit transaction as reverse sales or cash receipts that aren't cash, but neither is the preferred method. The general journal is the place for transactions ...

Solution Summary

Each of the questions is answered together with an explanation to support the answer. Also included are examples for ease of understanding.

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