21. The following are current liabilities except:

  • Deferred Revenue
  • Compensation and Benefits
  • Notes Payable
  • Short-term Loans Payable

22. True or False: When a business opens a line of credit with a vendor they are able to use that credit anywhere as long as it’s in the United States.

  • True
  • False

23. When setting up an account to document a line of credit in QuickBooks, you need to:

  • Set up two separate accounts, one for the principal and an expense account for interest
  • Set up an account for the person responsible for paying the line of credit down
  • Set up an S-Corp to ensure you can accurately enter data in QuickBooks

24. Seymore Fish takes out vendor credit of $5500 with “Akon Aquatics Custom Tank Supplies” to replace his custom-made fish tanks for “Seymore’s Sea Store” where he sells pet fish and small sea creatures.

Seymore would credit his line of credit under _______ for $5,500 and debit his _____ for $_______?

  • Current assets and Cash and cash equivalents; $4,000
  • Long-term debt and Liabilities; $5,500
  • Accounts payable and Fixed Asset- Fish Tank; $5,500

25. Seymore Fish of “Seymore’s Sea Store” purchased the glass and special paneling needed to rebuild his fish tanks for $2,000 from “Akon Aquatics Custom Tank Supplies”.

Should he:

  • Record the purchases as soon as the bill arrives, even though the payments have not yet been made to Akon Aquatics Custom Tank Supplies.
  • Record the purchases after the bill arrives and payment to Akon Aquatics
  • Record the purchase after the full amount of the line of credit from Akon

26. When Seymore makes purchases from, but still owes money to “Akon Aquatics Custom Tank Supplies” for the line of credit, he records the $2,000 of purchases in the journal entry by:

  • Debiting the supplies purchased under the liability named Debt and crediting PP&E under noncurrent assets for equipment for $2,000
  • Debiting the supplies purchased under the equity named Seymore’s Stash and crediting the investment under store revenue for $2,000
  • Debiting the supplies purchased under the expense named New Tank Supplies for $2,000 and crediting Accounts payable for $2,000

27. Now, Seymore has used and paid off the $2,000 line of credit he owed to “Akon Aquatics Custom Tank Supplies”. This journal entry should:

  • Debit financial inputs for $1,500 and credit share equity for $2,000.
  • Debit notes and loans payable for $2,000 and credit investments for $2,000.
  • Debit accounts payable for $2,000 and credit cash for $2,000.

28. Gift card purchases from “Penelope’s Punky Pins” would be considered deferred revenue.

  • True
  • False

Shuffle Q/A 3

29. Why is deferred revenue considered a liability?

  • Because the price of the good or service may fluctuate
  • Because it is technically for goods or services still owed to customers
  • Because it is considered an expense until the payment is collected

30. Deferred Revenues are not considered revenue until the product or service has been provided, thus they are not reported on the income statement.

  • True
  • False

Leave a Reply