Question 1

When paying off a note payable,last year's accrual was ignored and the total interest was recorded as an expense.This error would cause:

Accepted Answer

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

Question 2

Cory issued a note to his creditor in exchange for an account.Cory records the transaction as follows:

Accepted Answer

A) debit Notes Payable;credit Accounts Payable. 
B) debit Notes Receivable;credit Accounts Receivable. 
C) debit Accounts Payable;credit Notes Payable. 
D) debit Accounts Receivable;credit Notes Payable. 
A) debit Notes Payable;credit Accounts Payable. 
B) debit Notes Receivable;credit Accounts Receivable. 
C) debit Accounts Payable;credit Notes Payable. 
D) debit Accounts Receivable;credit Notes Payable.

Question 3

For notes payable issued in one period and due in the next period,accrued interest payable must be recorded at the end of the first period.

Accepted Answer

A) True 
 B)False

Question 4

When Major endorsed customer Minor's note to Story County Bank,Major agreed to pay the note at maturity if Minor failed to pay.Major's liability is a(n):

Accepted Answer

A) contra-liability. 
B) absolute liability. 
C) contingent liability. 
D) regular liability. 
A) contra-liability. 
B) absolute liability. 
C) contingent liability. 
D) regular liability.

Question 5

The terms payee and maker refer to the same entity.

Accepted Answer

A) True 
 B)False

Question 6

A promissory note received in granting a time extension to a charge customer.
Debit ________ Credit ________

Accepted Answer

The answer of A promissory note received in granting a...

Question 7

On November 10,Twister Rides issued a 12%,60-day,$10,000 promissory note.Twister should record the payment of the note on the maturity day as:

Accepted Answer

A) debit Notes Payable $10,200;credit Cash $10,200. 
B) debit Notes Payable $10,000;debit Interest Expense $200;credit Cash $10,200. 
C) debit Notes Payable $10,000;debit Interest Payable $200;credit Cash $10,200. 
D) debit Notes Payable $10,000;credit Cash $10,000. 
A) debit Notes Payable $10,200;credit Cash $10,200. 
B) debit Notes Payable $10,000;debit Interest Expense $200;credit Cash $10,200. 
C) debit Notes Payable $10,000;debit Interest Payable $200;credit Cash $10,200. 
D) debit Notes Payable $10,000;credit Cash $10,000.

Question 8

In computing interest,it is required to consider a 365-day year.

Accepted Answer

A) True 
 B)False

Question 9

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).
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Column 1 } & \text { Column 2 } & \text { Column } 3 & \text { Column } 4 \
\hline \text { Sales } & & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 10

When a note receivable is discounted,the business that endorses the note becomes potentially liable to the bank.This type of liability is called a:

Accepted Answer

A) dependent liability. 
B) contingent liability. 
C) potential liability. 
D) conditional liability. 
A) dependent liability. 
B) contingent liability. 
C) potential liability. 
D) conditional liability.

Question 11

Jeff Company issues a promissory note to David Company to get extended time on an account payable.Jeff Company records this transaction as follows:

Accepted Answer

A) debit Accounts Receivable;credit Notes Receivable. 
B) debit Notes Receivable;credit Accounts Receivable. 
C) debit Notes Payable;credit Accounts Payable. 
D) debit Accounts Payable;credit Notes Payable. 
A) debit Accounts Receivable;credit Notes Receivable. 
B) debit Notes Receivable;credit Accounts Receivable. 
C) debit Notes Payable;credit Accounts Payable. 
D) debit Accounts Payable;credit Notes Payable.

Question 12

An adjustment that must be made for the accrued interest on a note payable would include a:

Accepted Answer

A) credit to Interest Expense. 
B) debit to Interest Expense. 
C) debit to Interest Payable. 
D) credit to Notes Payable. 
A) credit to Interest Expense. 
B) debit to Interest Expense. 
C) debit to Interest Payable. 
D) credit to Notes Payable.

Question 13

Smyth Company borrows $10,000 by giving the bank its own 12%,60-day note.The bank discounts the interest.The effective interest rate is

Accepted Answer

A) 12.84%. 
B) 12.24%. 
C) 12.00%. 
D) 12.42%. 
A) 12.84%. 
B) 12.24%. 
C) 12.00%. 
D) 12.42%.

Question 14

Accrued interest resulting from a trade note receivable would have which effect on the categories?

Accepted Answer

A) Total liabilities would be increased. 
B) Total assets would be increased. 
C) Owner's equity would be decreased. 
D) None of these answers is correct. 
A) Total liabilities would be increased. 
B) Total assets would be increased. 
C) Owner's equity would be decreased. 
D) None of these answers is correct.

Question 15

Bill's Bikes discounts a customer's 90-day,8%,$4,000 note at a bank at 12%.The discount period is 50 days.It records the proceeds as:

Accepted Answer

A) debit Cash $4,012;credit Notes Receivable $4,000;credit Interest Income $12. 
B) debit Cash $4,160;credit Notes Receivable $4,080;credit Interest Income $80. 
C) debit Cash $4,068,credit Notes Receivable $4,000;credit Interest Income $68. 
D) debit Cash $4,012;credit Notes Receivable $4,000,credit Interest Expense $12. 
A) debit Cash $4,012;credit Notes Receivable $4,000;credit Interest Income $12. 
B) debit Cash $4,160;credit Notes Receivable $4,080;credit Interest Income $80. 
C) debit Cash $4,068,credit Notes Receivable $4,000;credit Interest Income $68. 
D) debit Cash $4,012;credit Notes Receivable $4,000,credit Interest Expense $12.

Question 16

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).
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Column 1 } & \text { Column } 2 & \text { Column } 3 & \text { Column } 4 \
\hline \begin{array} { l } 
\text { Accounts } \
\text { payable }
\end{array} & & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 17

Maturity value is Principal + Interest.

Accepted Answer

A) True 
 B)False

Question 18

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).
-$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Column } 1 & \text { Column } 2 & \text { Column } 3 & \text { Column } 4 \
\hline \text { Interest } & & & & \
\text { receivable } & & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 19

Scott Moore is considering accepting a $10,000,60-day,12% promissory note from Cory Gregor to extend additional time to settle a past-due account.Discuss some of the reasons why Moore would accept a promissory note from Cory Gregor.

Accepted Answer

a)To have a stronger legal claim for col

Question 20

To obtain an extension of time for the payment of an account,a customer may issue a note for any portion of the amount due.

Accepted Answer

A) True 
 B)False

Exam 14: Notes Receivable and Notes Payable

When paying off a note payable,last year's accrual was ignored and the total interest was recorded as an expense.This error would cause:

Cory issued a note to his creditor in exchange for an account.Cory records the transaction as follows:

For notes payable issued in one period and due in the next period,accrued interest payable must be recorded at the end of the first period.

When Major endorsed customer Minor's note to Story County Bank,Major agreed to pay the note at maturity if Minor failed to pay.Major's liability is a(n):

The terms payee and maker refer to the same entity.

A promissory note received in granting a time extension to a charge customer. Debit ________ Credit ________

On November 10,Twister Rides issued a 12%,60-day,$10,000 promissory note.Twister should record the payment of the note on the maturity day as:

In computing interest,it is required to consider a 365-day year.

When a note receivable is discounted,the business that endorses the note becomes potentially liable to the bank.This type of liability is called a:

Jeff Company issues a promissory note to David Company to get extended time on an account payable.Jeff Company records this transaction as follows:

An adjustment that must be made for the accrued interest on a note payable would include a:

Smyth Company borrows $10,000 by giving the bank its own 12%,60-day note.The bank discounts the interest.The effective interest rate is

Accrued interest resulting from a trade note receivable would have which effect on the categories?

Bill's Bikes discounts a customer's 90-day,8%,$4,000 note at a bank at 12%.The discount period is 50 days.It records the proceeds as:

Maturity value is Principal + Interest.

Scott Moore is considering accepting a $10,000,60-day,12% promissory note from Cory Gregor to extend additional time to settle a past-due account.Discuss some of the reasons why Moore would accept a promissory note from Cory Gregor.

To obtain an extension of time for the payment of an account,a customer may issue a note for any portion of the amount due.

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

Filters

A promissory note received in granting a time extension to a charge customer. Debit Credit