Exam 14: Notes Receivable and Notes Payable

On June 1, Mike's Motorcycle Shop accepted a 120-day, 8%, $10,000 note from a customer from the sale of a motorcycle. On July 1, after 30 days, Mike discounted the note at First Bank at 10%. Record the journal entries for Mike's Motorcycles.

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.

Interest on a $3,000, 10% promissory note for four months is:

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). -

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.

Receiving payment from a customer on an interest bearing note would entail a credit to Interest Income.

On November 10, Twister Rides issued a 14%, 90-day, $15,000 promissory note. Twister should record the payment of the note on the maturity day as:

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). -

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

When a business endorses a note and transfers it to a financial institution, the process is called:

A promissory note comes due on the:

Chase Hunford negotiated a $40,000 bank loan for 240 days at a bank rate of 10%. The bank deducted the interest in advance. Required (show your calculations): a)Calculate the amount of interest charged by the bank. b)Calculate the amount of cash Chase received from the bank. c)Calculate the effective interest rate charged by the bank. d)Prepare Chase's journal entry for the transaction.

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

Prepare the journal entries for the following transactions for Dobson Industries Company. a)Dobson sold $5,000 of merchandise to Bolt Imports Company on account. b)Dobson accepted a 60-day, 9% note from Bolt in settlement of its account. c)Bolt defaulted on its note on the maturity date. d)Collected the previously defaulted Bolt note plus $25 additional interest.

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

Smyth Company borrows $5,000 by giving the bank its own 8%, 90-day note. The bank discounts the interest. The effective interest rate is

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 the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Sold merchandise on account. Debit ________ & ________ Credit ________ & ________

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

The discount period on a discounted note is: