Employee vacation benefits:

Are estimated liabilities.

Increase net income.

Are recorded as an expense when the employee retires.

Are recorded as an expense when the employee takes a vacation.

Are contingent liabilities.

If a company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers, the receipt of cash would be journalized as:

Debit Cash $45,000; credit Unearned Revenue $45,000.

Debit Unearned Revenue $45,000; credit Sales $45,000.

Debit Sales $45,000, credit Unearned Revenue $45,000.

Debit Cash $45,000, credit Sales $45,000.

Debit Prepaid Subscriptions $45,000, credit Sales $45,000.

Recording employee payroll deductions may involve:

Liabilities to the employer.

Liabilities to federal and state governments.

Expenses for the gross wages and salaries.

Expenses for the employer portion of any medical insurance.

Expenses for state unemployment.

All of the following are employer payroll taxes except:

Federal unemployment tax.

State unemployment tax.

Social Security tax equal to that withheld from employees.

Federal income tax equal to that withheld from employees.

Medicare tax equal to that withheld from employees.

All of the following are true of known liabilities except:

May depend on some future event occurring.

Are obligations set by agreements, contracts, or laws.

Are definitely determinable.

Are measurable.

Include accounts payable, notes payable, and payroll.

All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:

The term provision is typically used under IRFS to refer to what is titled liability under U.S. GAAP.

Because tax regulatory systems of countries are different, the approach to recording taxes is totally different.

The definitions and characteristics of current liabilities are broadly similar for both U.S. GAAP and IFRS.

When there is a known current obligation that involves an uncertain amount, but one that can be reasonable estimated, both require similar treatment.

When there is little uncertainty surrounding current liabilities, both require companies to record them in a similar manner.

An estimated liability:

Is an unknown liability of a certain amount.

Is a known obligation of an uncertain amount that can be reasonably estimated.

Is not recorded until the amount is known for certain.

Can be the result of a lawsuit.

Is a liability that may occur if a future event occurs.

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000.

Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680.

Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.

Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid.