Question 1

Morris Law Firm is borrowing $10,000 at 6% interest for one year. The $10,000 is the:

Accepted Answer

A) proceeds. 
B) principal. 
C) amount of interest. 
D) net amount. 
A) proceeds. 
B) principal. 
C) amount of interest. 
D) net amount.

Question 2

In calculating interest on a note, it is necessary to take which of the following into consideration?

Accepted Answer

A) The bank 
B) The principal 
C) The payee 
D) The maker 
A) The bank 
B) The principal 
C) The payee 
D) The maker

Question 3

James borrowed $550 from Tracy. James promised in writing that he would repay the money to Tracy on May 13, 200x. At the time of the loan, Tracy records the transaction as a(n):

Accepted Answer

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

Question 4

Both Accounts Payable and Notes Payable are both informal promises to pay.

Accepted Answer

A) True 
 B)False

Question 5

Accrued interest on a note payable 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 increased. 
D) None of these answers are correct. 
A) Total liabilities would be increased. 
B) Total assets would be increased. 
C) Owner's equity would be increased. 
D) None of these answers are correct.

Question 6

Given the following accounts:
   Indicate the account(s)to be debited and credited to record the following transactions.
-Accrued interest on a note payable.
Debit ________ & ________ Credit ________ & ________

Accepted Answer

The answer of Given the following accounts:
   Indicate...

Question 7

Steadman's Computer endorses a customer's note dated June 17 to the bank on August The interest rate on the note is 10%, and the bank discount rate is 12%. The note matures on September 6. The discount period is:

Accepted Answer

A) 21 days. 
B) 60 days. 
C) 81 days. 
D) 0 days. 
A) 21 days. 
B) 60 days. 
C) 81 days. 
D) 0 days.

Question 8

A promissory note received for granting a time extension to a charge customer would have which effect on the categories?

Accepted Answer

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

Question 9

Prepare the journal entries for Fit City Company for the following transactions:
a)Fit sold $9,500 of merchandise to AllSport Company on account.
b)Fit City received a 90-day, $9,500, 10% note for a time extension of past-due account of AllSport.
c)Collected the AllSport note on the maturity date.

Accepted Answer

The answer of Prepare the journal entries for Fit City...

Question 10

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 11

The proceeds can never be less than the face value.

Accepted Answer

A) True 
 B)False

Question 12

If a company does not pay its note payable on the agreed upon date, the note:

Accepted Answer

A) is renewed automatically for the same period of time. 
B) is discounted at a higher rate of interest. 
C) is dishonored by the vendor. 
D) is automatically placed in collection with an outside agency. 
A) is renewed automatically for the same period of time. 
B) is discounted at a higher rate of interest. 
C) is dishonored by the vendor. 
D) is automatically placed in collection with an outside agency.

Question 13

When a commercial bank discounts a note on the date of issue, the interest is deducted in advance.

Accepted Answer

A) True 
 B)False

Question 14

A $6,500, 12% note dated April 23 for 88 days was discounted on June 2 at 14%. The amount of the discount (using a 360-day year)is:

Accepted Answer

A) $780.00. 
B) $190.67. 
C) $124.89. 
D) $115.56. 
A) $780.00. 
B) $190.67. 
C) $124.89. 
D) $115.56.

Question 15

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 16

Warner Enterprises was unable to collect a $1,000 note receivable plus $60 interest on the maturity date, but hoped to collect the amount in the future. Warner should record this as:

Accepted Answer

A) debit Bad Debts Expense $1,000; credit Notes Receivable $1,000. 
B) debit Allowance for Doubtful Accounts $1,060; credit Notes Receivable $1,060. 
C) debit Accounts Receivable $1,060; credit Interest Income $60; credit Notes Receivable $1,000. 
D) debit Accounts Receivable $1,000; debit Interest Income $60; credit Cash $1,060. 
A) debit Bad Debts Expense $1,000; credit Notes Receivable $1,000. 
B) debit Allowance for Doubtful Accounts $1,060; credit Notes Receivable $1,060. 
C) debit Accounts Receivable $1,060; credit Interest Income $60; credit Notes Receivable $1,000. 
D) debit Accounts Receivable $1,000; debit Interest Income $60; credit Cash $1,060.

Question 17

The basic formula for calculating the interest on a note is:

Accepted Answer

A) Interest = Principal × Rate × Time. 
B) Interest = (Principal × Rate)- Time. 
C) Interest = (Principal × Time)+ Rate. 
D) Interest = Principal × Rate/ Time. 
A) Interest = Principal × Rate × Time. 
B) Interest = (Principal × Rate)- Time. 
C) Interest = (Principal × Time)+ Rate. 
D) Interest = Principal × Rate/ Time.

Question 18

On February 15, Weber Services discounts a customer's 9%, 90-day, $10,000 note dated January 10. The discount rate charged by the bank is 12%. The discount period is:

Accepted Answer

A) 54 days. 
B) 36 days. 
C) 90 days. 
D) 0 days. 
A) 54 days. 
B) 36 days. 
C) 90 days. 
D) 0 days.

Question 19

There was no accrual for interest on a promissory note receivable; this error would cause:

Accepted Answer

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

Question 20

The formula for calculating interest on a note is: principal x rate x time.

Accepted Answer

A) True 
 B)False

Exam 14: Notes Receivable and Notes Payable

Morris Law Firm is borrowing $10,000 at 6% interest for one year. The $10,000 is the:

In calculating interest on a note, it is necessary to take which of the following into consideration?

James borrowed $550 from Tracy. James promised in writing that he would repay the money to Tracy on May 13, 200x. At the time of the loan, Tracy records the transaction as a(n):

Both Accounts Payable and Notes Payable are both informal promises to pay.

Accrued interest on a note payable would have which effect on the categories?

Given the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Accrued interest on a note payable. Debit ________ & ________ Credit ________ & ________

Steadman's Computer endorses a customer's note dated June 17 to the bank on August The interest rate on the note is 10%, and the bank discount rate is 12%. The note matures on September 6. The discount period is:

A promissory note received for granting a time extension to a charge customer would have which effect on the categories?

Prepare the journal entries for Fit City Company for the following transactions: a)Fit sold $9,500 of merchandise to AllSport Company on account. b)Fit City received a 90-day, $9,500, 10% note for a time extension of past-due account of AllSport. c)Collected the AllSport note on the maturity date.

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

The proceeds can never be less than the face value.

If a company does not pay its note payable on the agreed upon date, the note:

When a commercial bank discounts a note on the date of issue, the interest is deducted in advance.

A $6,500, 12% note dated April 23 for 88 days was discounted on June 2 at 14%. The amount of the discount (using a 360-day year)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). -

Warner Enterprises was unable to collect a $1,000 note receivable plus $60 interest on the maturity date, but hoped to collect the amount in the future. Warner should record this as:

The basic formula for calculating the interest on a note is:

On February 15, Weber Services discounts a customer's 9%, 90-day, $10,000 note dated January 10. The discount rate charged by the bank is 12%. The discount period is:

There was no accrual for interest on a promissory note receivable; this error would cause:

The formula for calculating interest on a note is: principal x rate x time.

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: the Conclusion of the Payroll Process

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, and Retained Earnings

Corporations and Bonds Payable

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

Filters

Given the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Accrued interest on a note payable. Debit & Credit &