Question

If cash is borrowed on a $57,600, 11-month, 10% note on August 1, how much interest expense would be incurred by December 31? $enter a dollar amount 2. The cash register total including sales taxes is $44,520, and the sales tax rate is 5%. What is the sales taxes payable? $enter a dollar amount 3. If $44,520 is collected in advance on November 1 for 5-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31? $enter a dollar amount

Answer 1

Answer:

1. $2,400

2. $2,120

3. $17,808

Explanation:

1. The computation of the interest expense is shown below:

= Total amount borrowed × interest rate × number of months ÷ total months in a year

= $57,600 × 10% × 5 months ÷ 12 months

= $2,400

The five months is calculated from August 1 to December 31

2. The computation of the sales taxes payable is shown below":

= Sales tax × sale tax rate ÷ 100 +  sale tax rate

= $44,520 × 5% ÷ 105%

= $2,120

3. The computation of the amount of subscription revenue recognized is shown below:

= Total advance collected × number of months ÷ given months

= $44,520 × 2 months ÷ 5 months

= $17,808

The two months is calculated from November 1 to December 31