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22. Which of the following items is best described as a listing of all the journal entries in order of their dates?

A. Trial ledger.

B. General ledger.

C. General journal.
   
Ans: C.

The listing of all the journal entries in order of their dates is called the general journal.

  

A is incorrect. “Trial ledger” is not part of an accounting system.

B is incorrect. The general ledger sorts the entries in the general journal by account.

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23. When the Bao Company filed its corporate tax returns for the first quarter of the current year, it owned a total of $6.7 million in corporate taxes. Bao paid $4.4 million of the tax bill, but still owes $2.3 million. It also received $478,000 in the second quarter as a down payment towards $942,000 in custom-built products to be delivered in the third quarter. Its financial accounts for the second quarter most likely show the $2.3 million and the $478,000 as: $2.3 million $478,000 A Income tax payable Unearned revenue B Income tax payable Accrued revenue C Deferred tax liability Accrued revenue

Ans: A. The $478,000 is unearned revenue, a liability. The $2.3 million owned to the government but not yet paid is income tax payable, also a liability. Deferred tax accounts arise from temporary difference between tax reporting and financial reporting.

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24. On January 31, Bao Inc. borrowed funds to purchase capital equipment for its business operations. On the same day, it also recorded the cost of salaries incurred to January 31, which will be paid on February 6. When these two transactions are recorded on January 31, the financial statement item that will increase the most is:

A. assets.

B. expenses.

C. liabilities.
   
Ans: C.

Borrowing funds to purchases capital equipment will result in an increase in assets (equipment) and in liabilities (debt). The accrual of the salaries that are owned, but not paid, as of month-end will increase expenses and increase liabilities (accrued salary expense). Therefore, these two transactions taken together will result in the greatest increase in liabilities.