Chapter 9

Question 1

Common current liabilities due to lenders

Answer 1

Bank indebtness
Short term loans
Current portion of long term debt

Question 2

Revolving credit facilities

Answer 2

Bank uses subsequent cash deposits to repay the loan

Question 3

Short term loans are secured by

Answer 3

AR or inventory or both

Question 4

Blended instalment payments

Answer 4

Long term loan payments that include both principal and interest components

Question 5

Current portion of long term debt

Answer 5

Portion of principal due within next year

Question 6

Reclassification entry

Answer 6

Presents current portion of long term debt amounts as current liabilities rather than long term

Question 7

Reclassification journal entry

Answer 7

Dr long term loan payable

Cr current portion of long term debt

Question 8

Current liabilities due to suppliers

Answer 8

Trade payables

Question 9

Current liabilities due to customers

Answer 9

Unearned revenue 
Gift card liability 
Customer loyalty provision 
Sales return provision 
Provision for warranty claims

Question 10

Journal entry for unearned revenue at time of customer purchase

Answer 10

Dr cash

Cr unearned revenue

Question 11

Journal entry for unearned revenue when service is provided

Answer 11

Dr unearned revenue

Cr revenue

Question 12

Two transactions relating to gift cards

Answer 12

Initial sale

Redemption

Question 13

Initial sale journal entry

Answer 13

Dr cash

Cr unearned revenue (or gift card liability)

Question 14

Redemption journal entry

Answer 14

Dr unearned revenue
Cr sales revenue
Dr COGS
Cr inventory

Question 15

Breakage

Answer 15

Gift cards never used, between 10 and 15% in Canada

Estimated portion of breakage is recognized as revenue and gift card liability reduced

Question 16

Two entries for loyalty programs

Answer 16

Initial sale

Additional goods to be provided in the future

Question 17

Journal entry for expected sales returns

Answer 17

Dr sales returns and allowances (contra revenue account)

Cr sales returns and provisions

Question 18

Warranty provision

Answer 18

Estimate amount each period and make a liability for it

Accrue a warranty expense and record liability named warranty provision

Question 19

Journal entry to record warranty provision in period of sale

Answer 19

Dr warranty expense

Cr warranty provision

Question 20

Journal entry when a warranty claim is made

Answer 20

Dr warranty provision
Cr one of the following 
Inventory
Inventory and wage expense 
Cash
Unearned revenue 
Miscellaneous revenue

Question 21

Current liabilities due to employees

Answer 21

Wages payable
Pensions
Employment insurance
Income tax

Question 22

Fringe benefits

Answer 22

Benefits that must be recognized cash expense in the periods for which they are incurred and a corresponding liability established

Question 23

Pension cost for employees

Answer 23

4.95%

Question 24

Pension costs for employers

Answer 24

Match employee

Question 25

Employment insurance cost for employees

Answer 25

1.88% of wages

Question 26

Employee insurance cost for employers

Answer 26

1.4 times what employee pays

Question 27

4 payroll entries

Answer 27

Employee entry Employer entry Payment of wages Remittance of source deductions

Question 28

Employee journal entry

Answer 28

``` Dr wage expense Cr employee income taxes payable Cr CPP Payable Cr EI payable Cr wages payable (and cash if paying now) ```

Question 29

Employer journal entry

Answer 29

Dr wage expense Cr cpp payable (equal employee) Cr EI payable (1.4 times employee)

Question 30

Payment of wages journal entry

Answer 30

Dr wages payable | Cr cash

Question 31

Remittance journal entry

Answer 31

Dr employee income taxes payable Dr cpp payable (both employee and employer) Dr ei payable (both portions) Cr cash

Question 32

Current liabilities due to government

Answer 32

Corporate tax return (no later than 6 months after end of fiscal year)

Question 33

Current liabilities due to shareholders

Answer 33

Dividends payable

Question 34

Dividend declared journal entry

Answer 34

Dr dividends declared | Cr dividends payable