1. A Wendy’s restaurant made cash sales of $4,000 subject to a 5% sales tax. Record the sales and the related sales tax. Also record Wendy’s payment of the tax to the state of South Carolina.
2. At December 31, 2011, Chastains’ Hair Salons reported the following liabilities:
|
Current Liabilities |
|
|
Portion of long term note payable due within one year |
$ 10,000 |
|
Interest payable ($210,000 * 0.06 * 6/12) |
6,300 |
|
Total current liabilities |
$ 16,300 |
|
Long Term Liabilities |
|
|
Long term note payable |
$200,000 |
|
Total liabilities |
$216,300 |
Chastains’ Hair Salons signed a $210,000, 21 year, 6% note on July 1, 2011. The note payments of $10,000 plus interest are due June 30 each year. Show how Chastains’ Hair Salons would report its liabilities on the yearend balance sheet one year later—December 31, 2012.
3. How does a contingent liability differ from an actual liability? When would a contingent liability be journalized?