Question 1

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 2

The maturity date of a 60-day note dated April 5 is June 3.

Accepted Answer

A) True 
 B)False

Question 3

The proceeds from discounting a note receivable are the:

Accepted Answer

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

Question 4

Harvey loaned $50 to Chase and received a promissory note. Chase is the:

Accepted Answer

A) maker. 
B) drawee. 
C) payee. 
D) debtor. 
A) maker. 
B) drawee. 
C) payee. 
D) debtor.

Question 5

Given the following accounts:
   Indicate the account(s)to be debited and credited to record the following transactions.
-Paying the principal plus accrued interest.
Debit ________ & ________ Credit ________ & ________

Accepted Answer

Debit 5 &

Question 6

Purchased merchandise (perpetual), by issuing a note, would have which effect on the categories?

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A $10,000, 7% note is dated May 18 and is due in 60 days. The due date would be:

Accepted Answer

A) July 15. 
B) July 16. 
C) July 17. 
D) July 18. 
A) July 15. 
B) July 16. 
C) July 17. 
D) July 18.

Question 9

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 10

The proper entry to make when a note is paid on the maturity date depends on whether the note is an interest-bearing or non-interest-bearing note.

Accepted Answer

A) True 
 B)False

Question 11

On March 15, Ben Jones negotiated a $25,000 bank loan for 270 days at an interest rate of 8%.
Required (show your calculations):
a)Determine the due date of the note.
b)Calculate the amount of interest charged by the bank.
c)Calculate the maturity value of the note.

Accepted Answer

a)December 10 (March 16 days, April 30 d

Question 12

When calculating the interest on a note receivable 365 days instead of 360 days was used. 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 13

In computing interest, it is required to consider a 365-day year.

Accepted Answer

A) True 
 B)False

Question 14

Interest calculated for one year on a $5,000, 8% promissory note is:

Accepted Answer

A) $4. 
B) $40. 
C) $400. 
D) some other amount. 
A) $4. 
B) $40. 
C) $400. 
D) some other amount.

Question 15

A $10,000, 7% note is dated May 18 and is due in 90 days. Using a 360-day year, the maturity value would be:

Accepted Answer

A) $10,000. 
B) $10,700. 
C) $10,175. 
D) $10,525. 
A) $10,000. 
B) $10,700. 
C) $10,175. 
D) $10,525.

Question 16

An adjustment that must be made for the accrued interest on a note receivable is to:

Accepted Answer

A) debit Interest Expense and credit Interest Payable. 
B) debit Interest Receivable and credit Interest Income. 
C) debit Interest Receivable and credit Notes Receivable. 
D) None of these answers are correct. 
A) debit Interest Expense and credit Interest Payable. 
B) debit Interest Receivable and credit Interest Income. 
C) debit Interest Receivable and credit Notes Receivable. 
D) None of these answers are correct.

Question 17

Maturity value is Principal + Discount.

Accepted Answer

A) True 
 B)False

Question 18

Betty's Boutique discounts its own 120-day, 6%, $25,000 note payable at a bank. It records the proceeds as:

Accepted Answer

A) debit Cash $24,500; debit Discounts on Notes Payable $500; credit Notes Payable $25,000. 
B) debit Cash $25,000; credit Notes Payable $25,000. 
C) debit Cash $23,500; debit Discount on Notes Payable $1,500; credit Notes Payable $25,000. 
D) debit Cash $24,500; credit Notes Payable $24,500. 
A) debit Cash $24,500; debit Discounts on Notes Payable $500; credit Notes Payable $25,000. 
B) debit Cash $25,000; credit Notes Payable $25,000. 
C) debit Cash $23,500; debit Discount on Notes Payable $1,500; credit Notes Payable $25,000. 
D) debit Cash $24,500; credit Notes Payable $24,500.

Question 19

Purchased merchandise (periodic)issuing a note 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) Both B and C would be correct. 
A) Total assets would be increased. 
B) Total liabilities would be increased. 
C) Owner's equity would be decreased. 
D) Both B and C would be correct.

Question 20

On December 16, an 11%, 60-day, $2,000 note was issued by Carmen. What entry does Carmen make on December 31 to recognize the interest?

Accepted Answer

A) Debit Interest Expense; credit Interest Payable $9.17 
B) Debit Interest Payable; credit Interest Expense for $9.17 
C) Debit Interest Receivable; credit Interest Income for $9.17 
D) None of these answers are correct. 
A) Debit Interest Expense; credit Interest Payable $9.17 
B) Debit Interest Payable; credit Interest Expense for $9.17 
C) Debit Interest Receivable; credit Interest Income for $9.17 
D) None of these answers are correct.

Exam 14: Notes Receivable and Notes Payable

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 of a 60-day note dated April 5 is June 3.

The proceeds from discounting a note receivable are the:

Harvey loaned $50 to Chase and received a promissory note. Chase is the:

Given the following accounts: Indicate the account(s)to be debited and credited to record the following transactions. -Paying the principal plus accrued interest. Debit ________ & ________ Credit ________ & ________

Purchased merchandise (perpetual), by issuing a note, would have which effect on the categories?

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

A $10,000, 7% note is dated May 18 and is due in 60 days. The due date would be:

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 proper entry to make when a note is paid on the maturity date depends on whether the note is an interest-bearing or non-interest-bearing note.

On March 15, Ben Jones negotiated a $25,000 bank loan for 270 days at an interest rate of 8%. Required (show your calculations): a)Determine the due date of the note. b)Calculate the amount of interest charged by the bank. c)Calculate the maturity value of the note.

When calculating the interest on a note receivable 365 days instead of 360 days was used. This error would cause:

In computing interest, it is required to consider a 365-day year.

Interest calculated for one year on a $5,000, 8% promissory note is:

A $10,000, 7% note is dated May 18 and is due in 90 days. Using a 360-day year, the maturity value would be:

An adjustment that must be made for the accrued interest on a note receivable is to:

Maturity value is Principal + Discount.

Betty's Boutique discounts its own 120-day, 6%, $25,000 note payable at a bank. It records the proceeds as:

Purchased merchandise (periodic)issuing a note would have which effect on the categories?

On December 16, an 11%, 60-day, $2,000 note was issued by Carmen. What entry does Carmen make on December 31 to recognize the interest?

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. -Paying the principal plus accrued interest. Debit & Credit &