Question 1

The proceeds from discounting a note receivable are the:

Accepted Answer

A)  principal + bank discount. 
B)  maturity value - bank discount. 
C)  principal - bank discount. 
D)  maturity value minus principal. 
A)  principal + bank discount. 
B)  maturity value - bank discount. 
C)  principal - bank discount. 
D)  maturity value minus principal.

Question 2

A $4,800, 10% note dated June 2 for 90 days was discounted on August 19 at 13%. The number of days in the discount period is 15 days.

Accepted Answer

A) True 
 B)False

Question 3

When a buyer receives a time extension by giving the seller a note, Accounts Payable is debited for the buyer.

Accepted Answer

A) True 
 B)False

Question 4

Interest due on a $21,000, 11%, 10-month note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $1,925 
B)  $2,310 
C)  $22,925 
D)  $21,000 
A)  $1,925 
B)  $2,310 
C)  $22,925 
D)  $21,000

Question 5

Notes Payable is a formal promise to pay.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The due date of a promissory note is the maturity date.

Accepted Answer

A) True 
 B)False

Question 8

Millionaires Bank accepts a promissory note for $4,000 from a customer on February 1, to be repaid in eight months plus 8% interest. The interest due on the note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $213. 
B)  $320. 
C)  $107. 
D)  $160. 
A)  $213. 
B)  $320. 
C)  $107. 
D)  $160.

Question 9

Straight Company sold merchandise to Cross Company and received a promissory note from Cross. Straight should record the transaction as:

Accepted Answer

A)  debit Notes Receivable and credit Sales for the principal amount of the note. 
B)  debit Notes Receivable and credit Sales for the maturity value of the note. 
C)  debit Accounts Receivable and credit Sales for the maturity amount of the note. 
D)  debit Accounts Receivable and credit Sales for the principal amount of the note. 
A)  debit Notes Receivable and credit Sales for the principal amount of the note. 
B)  debit Notes Receivable and credit Sales for the maturity value of the note. 
C)  debit Accounts Receivable and credit Sales for the maturity amount of the note. 
D)  debit Accounts Receivable and credit Sales for the principal amount of the note.

Question 10

Using a 360-day year, interest calculated for 90 days on a $9,000, 6% promissory note is:

Accepted Answer

A)  $135. 
B)  $540. 
C)  $405. 
D)  some other amount. 
A)  $135. 
B)  $540. 
C)  $405. 
D)  some other amount.

Question 11

The maturity date for a four-month note dated May 31 is:

Accepted Answer

A)  September 1. 
B)  September 30. 
C)  September 31. 
D)  October 1. 
A)  September 1. 
B)  September 30. 
C)  September 31. 
D)  October 1.

Question 12

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 13

Prepare general journal entries for the Bell Company for the following transactions:

Accepted Answer

The answer of Prepare general journal entries for the Bell...

Question 14

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 15

Given a 360-day year, the interest expense on a $2,000, 6%, 90-day promissory note payable is: (Do not round any intermediate calculations.)

Accepted Answer

A)  $30. 
B)  $120. 
C)  $90. 
D)  some other amount. 
A)  $30. 
B)  $120. 
C)  $90. 
D)  some other amount.

Question 16

The interest payment for a $17,000, 67-day note at 10% interest is $316.39.

Accepted Answer

A) True 
 B)False

Question 17

Sarah borrowed $2,200 from Cassandra. Sarah promised in writing that she would repay the money to Cassandra on June 18, 201X. At the time of the loan, Sarah records the transaction as a(n):

Accepted Answer

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

Question 18

Tricia's Decor purchased merchandise from House Beautiful and issued a promissory note. Tricia should record the transaction as:

Accepted Answer

A)  debit Purchases and credit Notes Payable for the principal amount of the note. 
B)  debit Purchases and credit Notes Payable for the maturity value of the note. 
C)  debit Purchases and credit Accounts Payable for the face amount of the note. 
D)  debit Purchases and credit Accounts Payable for the maturity value of the note. 
A)  debit Purchases and credit Notes Payable for the principal amount of the note. 
B)  debit Purchases and credit Notes Payable for the maturity value of the note. 
C)  debit Purchases and credit Accounts Payable for the face amount of the note. 
D)  debit Purchases and credit Accounts Payable for the maturity value of the note.

Question 19

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 20

To calculate an adjustment for interest accrued during a period, a company needs to:

Accepted Answer

A)  calculate interest on the note. 
B)  calculate the number of days the note has already run before the end of the current period. 
C)  calculate interest incurred for this period. 
D)  All of the above are correct. 
A)  calculate interest on the note. 
B)  calculate the number of days the note has already run before the end of the current period. 
C)  calculate interest incurred for this period. 
D)  All of the above are correct.

Exam 14: Notes Receivable and Notes Payable

The proceeds from discounting a note receivable are the:

A $4,800, 10% note dated June 2 for 90 days was discounted on August 19 at 13%. The number of days in the discount period is 15 days.

When a buyer receives a time extension by giving the seller a note, Accounts Payable is debited for the buyer.

Interest due on a $21,000, 11%, 10-month note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Notes Payable is a formal promise to pay.

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). -

The due date of a promissory note is the maturity date.

Millionaires Bank accepts a promissory note for $4,000 from a customer on February 1, to be repaid in eight months plus 8% interest. The interest due on the note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Straight Company sold merchandise to Cross Company and received a promissory note from Cross. Straight should record the transaction as:

Using a 360-day year, interest calculated for 90 days on a $9,000, 6% promissory note is:

The maturity date for a four-month note dated May 31 is:

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

Prepare general journal entries for the Bell Company for the following transactions:

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). -

Given a 360-day year, the interest expense on a $2,000, 6%, 90-day promissory note payable is: (Do not round any intermediate calculations.)

The interest payment for a $17,000, 67-day note at 10% interest is $316.39.

Sarah borrowed $2,200 from Cassandra. Sarah promised in writing that she would repay the money to Cassandra on June 18, 201X. At the time of the loan, Sarah records the transaction as a(n):

Tricia's Decor purchased merchandise from House Beautiful and issued a promissory note. Tricia should record the transaction as:

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.

To calculate an adjustment for interest accrued during a period, a company needs to:

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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