Question 1

Accrued interest on notes payable is interest expense that has been incurred but not paid.

Accepted Answer

A) True 
 B)False  True

Question 2

Match the terms with the definitions.
-The term of the note stated as a fraction of a year.

Accepted Answer

A) accrued interest on notes payable 
B) time 
C) proceeds (note receivable) 
D) principal of the note 
E) notes payable register
F)credit advice
G)maturity value
H)discounting a note receivable
I)dishonored
J)effective rate
K)promissory note
L)maker 
A) accrued interest on notes payable 
B) time 
C) proceeds (note receivable) 
D) principal of the note 
E) notes payable register
F)credit advice
G)maturity value
H)discounting a note receivable
I)dishonored
J)effective rate
K)promissory note
L)maker B

Question 3

When banks deduct interest on a note in advance, this procedure in known as

Accepted Answer

A)  endorsing. 
B)  recording. 
C)  securing. 
D)  discounting. 
A)  endorsing. 
B)  recording. 
C)  securing. 
D)  discounting. D

Question 4

Match the terms with the definitions.
-An interest fee that the bank charges for the time between the date of discounting and the due date of the note.

Accepted Answer

A) term of the note 
B) accrued interest on notes receivable 
C) bank discount (note payable) 
D) bank discount (note receivable) 
E) contingent liability
F)rate of interest
G)discounting (note payable)
H)payee
I)notes receivable register
J)non-interest-bearing note
K)interest-bearing note 
A) term of the note 
B) accrued interest on notes receivable 
C) bank discount (note payable) 
D) bank discount (note receivable) 
E) contingent liability
F)rate of interest
G)discounting (note payable)
H)payee
I)notes receivable register
J)non-interest-bearing note
K)interest-bearing note

Question 5

The maker of the note is the one who is to receive the specified amount of money.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is usually expressed in the form of a percentage?

Accepted Answer

A)  rate of interest 
B)  principal of the note 
C)  time of the note 
D)  discount of the note 
A)  rate of interest 
B)  principal of the note 
C)  time of the note 
D)  discount of the note

Question 7

Maturity value minus the discount amount is called the

Accepted Answer

A)  discount. 
B)  proceeds. 
C)  principal. 
D)  maturity value. 
A)  discount. 
B)  proceeds. 
C)  principal. 
D)  maturity value.

Question 8

Match the terms with the definitions.
-A note on which no rate of interest is specified, although the note does include an interest component.

Accepted Answer

A) term of the note 
B) accrued interest on notes receivable 
C) bank discount (note payable) 
D) bank discount (note receivable) 
E) contingent liability
F)rate of interest
G)discounting (note payable)
H)payee
I)notes receivable register
J)non-interest-bearing note
K)interest-bearing note 
A) term of the note 
B) accrued interest on notes receivable 
C) bank discount (note payable) 
D) bank discount (note receivable) 
E) contingent liability
F)rate of interest
G)discounting (note payable)
H)payee
I)notes receivable register
J)non-interest-bearing note
K)interest-bearing note

Question 9

If a business needs cash before the due date of a note, it can endorse the note and transfer it to a bank.

Accepted Answer

A) True 
 B)False

Question 10

Maturity value is equal to face value plus interest.

Accepted Answer

A) True 
 B)False

Question 11

When a note receivable matures, the amount must be paid directly to the payee.

Accepted Answer

A) True 
 B)False

Question 12

An auxiliary record of notes receivable that provides detailed information about the notes held by a business is known as a notes receivable register.

Accepted Answer

A) True 
 B)False

Question 13

The discount on a note payable gradually becomes

Accepted Answer

A)  interest expense. 
B)  interest revenue. 
C)  interest payable. 
D)  interest receivable. 
A)  interest expense. 
B)  interest revenue. 
C)  interest payable. 
D)  interest receivable.

Question 14

When a company pays cash to redeem a interest-bearing-note, the transaction includes

Accepted Answer

A)  debiting Cash and crediting Notes Payable. 
B)  debiting Cash and Interest Expense and crediting Notes Payable. 
C)  debiting Notes Payable and crediting Cash. 
D)  debiting Cash and crediting Notes Receivable. 
A)  debiting Cash and crediting Notes Payable. 
B)  debiting Cash and Interest Expense and crediting Notes Payable. 
C)  debiting Notes Payable and crediting Cash. 
D)  debiting Cash and crediting Notes Receivable.

Question 15

When a bank collects a note for the holder, it notifies the holder on a form called a

Accepted Answer

A)  debit advice. 
B)  proceed report. 
C)  collection report. 
D)  credit advice. 
A)  debit advice. 
B)  proceed report. 
C)  collection report. 
D)  credit advice.

Question 16

Match the terms with the definitions.
-The principal of the note plus interest.

Accepted Answer

A) accrued interest on notes payable 
B) time 
C) proceeds (note receivable) 
D) principal of the note 
E) notes payable register
F)credit advice
G)maturity value
H)discounting a note receivable
I)dishonored
J)effective rate
K)promissory note
L)maker 
A) accrued interest on notes payable 
B) time 
C) proceeds (note receivable) 
D) principal of the note 
E) notes payable register
F)credit advice
G)maturity value
H)discounting a note receivable
I)dishonored
J)effective rate
K)promissory note
L)maker

Question 17

When a bank collects a notes receivable, it notifies the payee that the net amount has been added to the payee's account by using a credit advice.

Accepted Answer

A) True 
 B)False

Question 18

A $7,300, 11.9% note is dated April 21 and is due in 60 days. The amount of interest on the due date of the note would be

Accepted Answer

A)  $119.00. 
B)  $60.00. 
C)  $73.00. 
D)  $144.78. 
A)  $119.00. 
B)  $60.00. 
C)  $73.00. 
D)  $144.78.

Question 19

When the holder of an interest-bearing note is unable to collect the note when due, the journal entry includes

Accepted Answer

A)  debiting Notes Receivable and crediting Accounts Receivable. 
B)  debiting Notes Receivable and crediting Accounts Receivable and Interest Revenue. 
C)  debiting Accounts Receivable and crediting Interest Revenue. 
D)  debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue. 
A)  debiting Notes Receivable and crediting Accounts Receivable. 
B)  debiting Notes Receivable and crediting Accounts Receivable and Interest Revenue. 
C)  debiting Accounts Receivable and crediting Interest Revenue. 
D)  debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue.

Question 20

An auxiliary record of notes payable that provides detailed information about the notes owed by a business is known as a notes payable journal.

Accepted Answer

A) True 
 B)False

Exam 17: Accounting for Notes and Interest

Accrued interest on notes payable is interest expense that has been incurred but not paid.

Match the terms with the definitions. -The term of the note stated as a fraction of a year.

When banks deduct interest on a note in advance, this procedure in known as

Match the terms with the definitions. -An interest fee that the bank charges for the time between the date of discounting and the due date of the note.

The maker of the note is the one who is to receive the specified amount of money.

Which of the following is usually expressed in the form of a percentage?

Maturity value minus the discount amount is called the

Match the terms with the definitions. -A note on which no rate of interest is specified, although the note does include an interest component.

If a business needs cash before the due date of a note, it can endorse the note and transfer it to a bank.

Maturity value is equal to face value plus interest.

When a note receivable matures, the amount must be paid directly to the payee.

An auxiliary record of notes receivable that provides detailed information about the notes held by a business is known as a notes receivable register.

The discount on a note payable gradually becomes

When a company pays cash to redeem a interest-bearing-note, the transaction includes

When a bank collects a note for the holder, it notifies the holder on a form called a

Match the terms with the definitions. -The principal of the note plus interest.

When a bank collects a notes receivable, it notifies the payee that the net amount has been added to the payee's account by using a credit advice.

A $7,300, 11.9% note is dated April 21 and is due in 60 days. The amount of interest on the due date of the note would be

When the holder of an interest-bearing note is unable to collect the note when due, the journal entry includes

An auxiliary record of notes payable that provides detailed information about the notes owed by a business is known as a notes payable journal.

Introduction to Accounting

Analyzing Transactions: the Accounting Equation

The Double-Entry Framework

Journalizing and Posting Transactions

Adjusting Entries and the Work Sheet

Financial Statements and the Closing Process

Accounting for Cash

Payroll Accounting: Employee Earnings and Deductions

Payroll Accounting: Employer Taxes and Reports

Accounting for Sales and Cash Receipts

Accounting for Purchases and Cash Payments

Special Journals

Accounting for Merchandise Inventory

Adjustments and the Work Sheet for a Merchandising Business

Financial Statements and Year-End Accounting for a Merchandising Business

Accounting for Accounts Receivable

Accounting for Long-Term Assets

Accounting for Partnerships

Corporations: Organization and Capital Stocks

Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

Corporations: Bonds

Statement of Cash Flows

Analysis of Financial Statements

Departmental Accounting

Manufacturing Accounting: The Job Order Cost System

Manufacturing Accounting: The Work Sheet and Financial Statements

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