Question 1

Calculate the simple interest and maturity value for the following:
a)$10,000,10%,2 1/2 years
b)$3,500,5%,9 months
c)$8,000,14%,90 days

Accepted Answer

a)$2,500.00 and $12,

Question 2

In the basic formula for calculating interest on a promissory note,principal refers to:

Accepted Answer

A) the original amount - the discount. 
B) the amount of interest to be paid. 
C) the original amount loaned or borrowed. 
D) the maturity value. 
A) the original amount - the discount. 
B) the amount of interest to be paid. 
C) the original amount loaned or borrowed. 
D) the maturity value.

Question 3

Sold merchandise (perpetual)on account would have which effect on the following categories?

Accepted Answer

A) Total Accounts Receivable would increase. 
B) Total revenues would be increased. 
C) Total liabilities would increase. 
D) A and B would definitely occur. 
A) Total Accounts Receivable would increase. 
B) Total revenues would be increased. 
C) Total liabilities would increase. 
D) A and B would definitely occur.

Question 4

Why is the effective rate of interest always higher than the interest rate of the loan on a discounted note?

Accepted Answer

The effective rate of interest

Question 5

The discount period is the amount of time the bank holds a note that was discounted until the maturity date.

Accepted Answer

A) True 
 B)False

Question 6

Johnson issues a $5,000,7%,100-day promissory note to Adam on November 1.What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year)?

Accepted Answer

A) Debit Interest Expense;credit Interest Payable for $58.33 
B) Debit Interest Expense;credit Interest Payable for $97.22 
C) Debit Interest Receivable;credit Interest Income for $58.33 
D) Debit Interest Receivable;credit Interest Income for $97.22 
A) Debit Interest Expense;credit Interest Payable for $58.33 
B) Debit Interest Expense;credit Interest Payable for $97.22 
C) Debit Interest Receivable;credit Interest Income for $58.33 
D) Debit Interest Receivable;credit Interest Income for $97.22

Question 7

The due date of a promissory note is known as the:

Accepted Answer

A) discount date. 
B) issue date. 
C) interest note. 
D) maturity date. 
A) discount date. 
B) issue date. 
C) interest note. 
D) maturity date.

Question 8

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement that the account in which the account balance is reported, and in Column 4 the account's nature (temporary/permanent).
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Column } 1 & \text { Column } 2 & \text { Column } 3 & \text { Column } 4 \
\hline \text { Notes payable } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following, identify in...

Question 9

A $5,500,10% note dated May 20 for 78 days was discounted on June 23 at 12%.The amount of the discount (using a 360-day year)is:

Accepted Answer

A) $119.16. 
B) $191.16 
C) $124.89. 
D) $82.41. 
A) $119.16. 
B) $191.16 
C) $124.89. 
D) $82.41.

Question 10

The journal entry to record the payment of a discounted note at maturity is a debit to Notes Payable and Interest Expense,and a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 11

A 90-day note dated July 9 would be due on October 7.

Accepted Answer

A) True 
 B)False

Question 12

James borrowed $950 from Tracy.James promised in writing that he would repay the money to Tracy on May 13,201X.At the time of the loan,Tracy records the transaction as a(n):

Accepted Answer

A) Accounts Receivable. 
B) Accounts Payable. 
C) Promissory Note Receivable. 
D) Promissory Note Payable. 
A) Accounts Receivable. 
B) Accounts Payable. 
C) Promissory Note Receivable. 
D) Promissory Note Payable.

Question 13

The adjusting entry for accrued interest on a notes receivable would include:

Accepted Answer

A) a debit to Interest Expense. 
B) a credit to Accrued Interest Receivable. 
C) a credit to Interest Income. 
D) a credit to Interest Payable. 
A) a debit to Interest Expense. 
B) a credit to Accrued Interest Receivable. 
C) a credit to Interest Income. 
D) a credit to Interest Payable.

Question 14

Marble Company discounts a customer's 10%,$7,000,90-day note dated August 1,on September 20.The discount period is 40 days,and the bank discount rate is 15%.The maturity value of the note is $7,175.The bank discount is:

Accepted Answer

A) $95.62. 
B) $31.88. 
C) $119.58. 
D) $43.25. 
A) $95.62. 
B) $31.88. 
C) $119.58. 
D) $43.25.

Question 15

The amount the bank charges when it discounts a note is calculated as:

Accepted Answer

A) bank discount = note principal × bank discount rate × (discount period /360 days). 
B) bank discount = maturity value × bank discount rate × (original note period /360 days). 
C) bank discount = maturity value × bank discount rate + original interest rate (discount period /360 days). 
D) bank discount = maturity value × bank discount rate × (discount period /360 days). 
A) bank discount = note principal × bank discount rate × (discount period /360 days). 
B) bank discount = maturity value × bank discount rate × (original note period /360 days). 
C) bank discount = maturity value × bank discount rate + original interest rate (discount period /360 days). 
D) bank discount = maturity value × bank discount rate × (discount period /360 days).

Question 16

In the basic formula for calculating interest,rate refers to:

Accepted Answer

A) percent per day. 
B) percent per year. 
C) percent per quarter. 
D) percent per month. 
A) percent per day. 
B) percent per year. 
C) percent per quarter. 
D) percent per month.

Question 17

When calculating the interest on a note receivable 365 days instead of 360 days was used.This error would cause:

Accepted Answer

A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) the period's net income to be understated. 
A) the period end assets to be overstated. 
B) the period end liabilities to be understated. 
C) the period's net income to be overstated. 
D) the period's net income to be understated.

Question 18

If a company does not pay its note payable on the agreed upon date,the note:

Accepted Answer

A) is renewed automatically for the same period of time. 
B) is discounted at a higher rate of interest. 
C) is dishonored by the vendor. 
D) is automatically placed in collection with an outside agency. 
A) is renewed automatically for the same period of time. 
B) is discounted at a higher rate of interest. 
C) is dishonored by the vendor. 
D) is automatically placed in collection with an outside agency.

Question 19

Interest income is on a merchandise company's income statement under the heading:

Accepted Answer

A) Sales Revenue. 
B) Other Income or Interest Income. 
C) Unearned Revenue. 
D) Notes Receivable. 
A) Sales Revenue. 
B) Other Income or Interest Income. 
C) Unearned Revenue. 
D) Notes Receivable.

Question 20

Prepare journal entries for the following transactions for Grant Company:
May 1 Purchased equipment from Knox,Inc.for $5,000 giving a 3 month 8% note
Aug.1 Paid amount due on note

Accepted Answer

The answer of Prepare journal entries for the following transactions...

Exam 14: Notes Receivable and Notes Payable

Calculate the simple interest and maturity value for the following: a)$10,000,10%,2 1/2 years b)$3,500,5%,9 months c)$8,000,14%,90 days

In the basic formula for calculating interest on a promissory note,principal refers to:

Sold merchandise (perpetual)on account would have which effect on the following categories?

Why is the effective rate of interest always higher than the interest rate of the loan on a discounted note?

The discount period is the amount of time the bank holds a note that was discounted until the maturity date.

Johnson issues a $5,000,7%,100-day promissory note to Adam on November 1.What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year)?

The due date of a promissory note is known as the:

A $5,500,10% note dated May 20 for 78 days was discounted on June 23 at 12%.The amount of the discount (using a 360-day year)is:

The journal entry to record the payment of a discounted note at maturity is a debit to Notes Payable and Interest Expense,and a credit to Cash.

A 90-day note dated July 9 would be due on October 7.

James borrowed $950 from Tracy.James promised in writing that he would repay the money to Tracy on May 13,201X.At the time of the loan,Tracy records the transaction as a(n):

The adjusting entry for accrued interest on a notes receivable would include:

Marble Company discounts a customer's 10%,$7,000,90-day note dated August 1,on September 20.The discount period is 40 days,and the bank discount rate is 15%.The maturity value of the note is $7,175.The bank discount is:

The amount the bank charges when it discounts a note is calculated as:

In the basic formula for calculating interest,rate refers to:

When calculating the interest on a note receivable 365 days instead of 360 days was used.This error would cause:

If a company does not pay its note payable on the agreed upon date,the note:

Interest income is on a merchandise company's income statement under the heading:

Prepare journal entries for the following transactions for Grant Company: May 1 Purchased equipment from Knox,Inc.for $5,000 giving a 3 month 8% note Aug.1 Paid amount due on note

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: the Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes:

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Accounting for Merchandise Inventory

Accounting for Property,plant,equipment,and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values,dividends,treasury Stocks,

Corporations and Bonds Payable

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

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