Question 1

Accrued interest on a note payable would:

Accepted Answer

A)  increase total liabilities. 
B)  increase owner's equity. 
C)  increase total assets. 
D)  None of these answers is correct. 
A)  increase total liabilities. 
B)  increase owner's equity. 
C)  increase total assets. 
D)  None of these answers is correct.

Question 2

Failure of maker to pay the maturity value of a note when due is considered a(n):

Accepted Answer

A)  honored note. 
B)  equipment exchange. 
C)  default. 
D)  None of the above. 
A)  honored note. 
B)  equipment exchange. 
C)  default. 
D)  None of the above.

Question 3

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 4

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).
-

Accepted Answer

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

Question 5

Additional time given to the payee to settle an account with issuance of a note, results in a transfer of:

Accepted Answer

A)  assets from Notes Receivable to Accounts Receivable. 
B)  assets from Accounts Receivable to Notes Receivable. 
C)  liabilities from Notes Payable to Accounts Payable. 
D)  liabilities from Accounts Payable to Notes Payable. 
A)  assets from Notes Receivable to Accounts Receivable. 
B)  assets from Accounts Receivable to Notes Receivable. 
C)  liabilities from Notes Payable to Accounts Payable. 
D)  liabilities from Accounts Payable to Notes Payable.

Question 6

Julius Juices borrows $34,000 by giving the bank its own 8%, 120-day note. The bank discounts the interest. The effective interest rate is: (Use a 360-day year. Do not round any intermediate calculations. Round your final answer two decimal places, X.XX%.)

Accepted Answer

A)  8.00%. 
B)  8.22%. 
C)  7.79%. 
D)  8.44%. 
A)  8.00%. 
B)  8.22%. 
C)  7.79%. 
D)  8.44%.

Question 7

Interest due on a $26,000, 11%, 2.5-year note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $2,860. 
B)  $33,150. 
C)  $7,150. 
D)  $26,000. 
A)  $2,860. 
B)  $33,150. 
C)  $7,150. 
D)  $26,000.

Question 8

A promissory note from the payee's point of view is a(n):

Accepted Answer

A)  Notes Receivable. 
B)  Notes Payable. 
C)  Accounts Receivable. 
D)  Accounts Payable. 
A)  Notes Receivable. 
B)  Notes Payable. 
C)  Accounts Receivable. 
D)  Accounts Payable.

Question 9

What is the adjusting entry to record interest for Pristine Company (the holder of the note) as of December 31 if they receive a $20,000, 90-day, 9% note on December 10th from Elegant Company (debtor)? (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  Debit to Interest Income of $105; credit to Interest Receivable of $105. 
B)  Debit to Interest Expense of $450; credit to Interest Payable of $450. 
C)  Debit to Interest Payable of $450; credit to Interest Expense of $450. 
D)  Debit to Interest Receivable of $105; credit to Interest Income of $105. 
A)  Debit to Interest Income of $105; credit to Interest Receivable of $105. 
B)  Debit to Interest Expense of $450; credit to Interest Payable of $450. 
C)  Debit to Interest Payable of $450; credit to Interest Expense of $450. 
D)  Debit to Interest Receivable of $105; credit to Interest Income of $105.

Question 10

How would you compute the accrued interest expense on December 31 for a $3,600 note payable for 80 days at 12% interest dated November 10?

Accepted Answer

$3,600 × .

Question 11

Brooke Company grants James Decorating additional time to pay its past due account. James makes a written promise to pay Brooke the amount on a certain date. Brooke Company records this transaction as follows:

Accepted Answer

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

Question 12

Canton Graphics issues a $22,000, 10%, 8-month note to Bowden Corporation. Interest on the note is _________ and the maturity value is __________. (Do not round any intermediate calculations. Round your final answers to the nearest dollar.)

Accepted Answer

A)  $1,467; $22,000 
B)  $1,467; $23,467 
C)  $23,467; $1,467 
D)  $22,000; $1,467 
A)  $1,467; $22,000 
B)  $1,467; $23,467 
C)  $23,467; $1,467 
D)  $22,000; $1,467

Question 13

On April 3, Angel Express issued a 12%, 90-day, $14,000 promissory note. Angel Express should record the payment of the note on the maturity day as: (Use a 360-day year. Do not round any intermediate calculations. Round your final answers to the nearest dollar.)

Accepted Answer

A)  debit Notes Payable $14,420; credit Cash $14,420. 
B)  debit Notes Payable $14,000; debit Interest Expense $420; credit Cash $14,420. 
C)  debit Notes Payable $14,000; debit Interest Payable $420; credit Cash $14,420. 
D)  debit Notes Payable $14,000; credit Cash $14,000. 
A)  debit Notes Payable $14,420; credit Cash $14,420. 
B)  debit Notes Payable $14,000; debit Interest Expense $420; credit Cash $14,420. 
C)  debit Notes Payable $14,000; debit Interest Payable $420; credit Cash $14,420. 
D)  debit Notes Payable $14,000; credit Cash $14,000.

Question 14

A $2,800, 10% note dated March 12 for 80 days was discounted on May 2 at 12%. The number of days in the discount period (using a 365-day year) is:

Accepted Answer

A)  51 days. 
B)  80 days. 
C)  29 days. 
D)  some other number. 
A)  51 days. 
B)  80 days. 
C)  29 days. 
D)  some other number.

Question 15

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 16

The maturity date for a 94-day note dated April 19 is:

Accepted Answer

A)  July 21. 
B)  July 16. 
C)  July 22. 
D)  July 24. 
A)  July 21. 
B)  July 16. 
C)  July 22. 
D)  July 24.

Question 17

The nominal interest rate on the note is more than the effective interest rate on a discounted note payable.

Accepted Answer

A) True 
 B)False

Question 18

On June 1, Mike's Motorcycle Shop accepted a 90-day, 10%, $8,000 note from a customer from the sale of a motorcycle. On July 21, after 50 days, Mike discounted the note at First Bank at 8%. Record the journal entries for Mike's Motorcycles.

Accepted Answer

@#IMG-DLM& Interest: $8,000 × 10% × 90/3

Question 19

John borrowed $1,030 from Melanie. John promised in writing that he would repay the money to Melanie on April 21, 201X. At the time of the loan, Melanie records the transaction as a(n):

Accepted Answer

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

Question 20

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 co

Exam 14: Notes Receivable and Notes Payable

Accrued interest on a note payable would:

Failure of maker to pay the maturity value of a note when due is considered a(n):

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

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). -

Additional time given to the payee to settle an account with issuance of a note, results in a transfer of:

Julius Juices borrows $34,000 by giving the bank its own 8%, 120-day note. The bank discounts the interest. The effective interest rate is: (Use a 360-day year. Do not round any intermediate calculations. Round your final answer two decimal places, X.XX%.)

Interest due on a $26,000, 11%, 2.5-year note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

A promissory note from the payee's point of view is a(n):

How would you compute the accrued interest expense on December 31 for a $3,600 note payable for 80 days at 12% interest dated November 10?

Brooke Company grants James Decorating additional time to pay its past due account. James makes a written promise to pay Brooke the amount on a certain date. Brooke Company records this transaction as follows:

Canton Graphics issues a $22,000, 10%, 8-month note to Bowden Corporation. Interest on the note is _________ and the maturity value is __________. (Do not round any intermediate calculations. Round your final answers to the nearest dollar.)

On April 3, Angel Express issued a 12%, 90-day, $14,000 promissory note. Angel Express should record the payment of the note on the maturity day as: (Use a 360-day year. Do not round any intermediate calculations. Round your final answers to the nearest dollar.)

A $2,800, 10% note dated March 12 for 80 days was discounted on May 2 at 12%. The number of days in the discount period (using a 365-day year) is:

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:

The maturity date for a 94-day note dated April 19 is:

The nominal interest rate on the note is more than the effective interest rate on a discounted note payable.

On June 1, Mike's Motorcycle Shop accepted a 90-day, 10%, $8,000 note from a customer from the sale of a motorcycle. On July 21, after 50 days, Mike discounted the note at First Bank at 8%. Record the journal entries for Mike's Motorcycles.

John borrowed $1,030 from Melanie. John promised in writing that he would repay the money to Melanie on April 21, 201X. At the time of the loan, Melanie records the transaction as a(n):

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.

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

Canton Graphics issues a $22,000, 10%, 8-month note to Bowden Corporation. Interest on the note is _ and the maturity value is __. (Do not round any intermediate calculations. Round your final answers to the nearest dollar.)