Question 1

The person or company that borrows money and signs a promissory note payable is the:

Accepted Answer

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

Question 2

A note that is not paid on the maturity date is considered dishonored.

Accepted Answer

A) True 
 B)False

Question 3

The proceeds of a discounted note are the face value less the bank discount.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Prepare journal entries for the following transactions for Sysco Imports Company.
a)Purchased $4,000 of merchandise (periodic)from Clarke Industries Company on account.
b)Gave Clarke Industries Company a 60-day, 9% note settlement of the account payable.
c)Sysco defaulted on its note on the maturity date.
d)Sysco paid the previously defaulted note plus $25 additional interest.

Accepted Answer

The answer of Prepare journal entries for the following transactions...

Question 6

The amount the bank charges when it discounts a note is calculated as:

Accepted Answer

A) bank discount = note principal × bank discount rate × (discount period /360 days). 
B) bank discount = maturity value × bank discount rate × (original note period /360 days). 
C) bank discount = maturity value × bank discount rate + original interest rate (discount period /360 days). 
D) bank discount = maturity value × bank discount rate × (discount period /360 days). 
A) bank discount = note principal × bank discount rate × (discount period /360 days). 
B) bank discount = maturity value × bank discount rate × (original note period /360 days). 
C) bank discount = maturity value × bank discount rate + original interest rate (discount period /360 days). 
D) bank discount = maturity value × bank discount rate × (discount period /360 days).

Question 7

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 8

In the basic formula for calculating interest on a promissory note, principal refers to:

Accepted Answer

A) the original amount-the discount. 
B) the amount of interest to be paid. 
C) the original amount loaned or borrowed. 
D) the maturity value. 
A) the original amount-the discount. 
B) the amount of interest to be paid. 
C) the original amount loaned or borrowed. 
D) the maturity value.

Question 9

Prepare general journal entries for the Knapp Computers Company for the following transactions:

Accepted Answer

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

Question 10

The journal entry for accrued interest on a note payable includes:

Accepted Answer

A) debiting Interest Expense. 
B) debiting Accrued Interest Payable. 
C) crediting Interest Expense. 
D) debiting Accrued Interest Receivable. 
A) debiting Interest Expense. 
B) debiting Accrued Interest Payable. 
C) crediting Interest Expense. 
D) debiting Accrued Interest Receivable.

Question 11

David borrows $2,000 from Matthew and gives him a promissory note. Matthew is the:

Accepted Answer

A) payee. 
B) payor. 
C) maker. 
D) drawer. 
A) payee. 
B) payor. 
C) maker. 
D) drawer.

Question 12

For the maker, being given additional time to settle an account with issuance of a note results in a shift 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 13

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

Accepted Answer

A) debit Interest Expense and credit Interest Income. 
B) credit Interest Expense and debit Interest Income. 
C) debit Interest Expense and credit Interest Payable. 
D) debit Interest Expense and credit Cash. 
A) debit Interest Expense and credit Interest Income. 
B) credit Interest Expense and debit Interest Income. 
C) debit Interest Expense and credit Interest Payable. 
D) debit Interest Expense and credit Cash.

Question 14

The terms payee and maker are interchangeable.

Accepted Answer

A) True 
 B)False

Question 15

When an interest-bearing note comes due and is uncollectible, the journal entry includes:

Accepted Answer

A) debiting Notes Receivable; crediting Accounts Receivable. 
B) debiting Notes Receivable; crediting Accounts Receivable and Interest Revenue. 
C) debiting Accounts Receivable and crediting Interest Revenue. 
D) debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue. 
A) debiting Notes Receivable; crediting Accounts Receivable. 
B) debiting Notes Receivable; crediting Accounts Receivable and Interest Revenue. 
C) debiting Accounts Receivable and crediting Interest Revenue. 
D) debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue.

Question 16

Colo Bank accepts a promissory note for $3,000 from a customer on November 1, to be repaid in seven months plus 8% interest. The maturity value of the note is:

Accepted Answer

A) $3,240. 
B) $3,140. 
C) $3,075. 
D) $3,000. 
A) $3,240. 
B) $3,140. 
C) $3,075. 
D) $3,000.

Question 17

When a company goes to a bank and exchanges a note for cash, the process is called discounting a note.

Accepted Answer

A) True 
 B)False

Question 18

When an account receivable is exchanged for a note receivable, a shift in assets occurs.

Accepted Answer

A) True 
 B)False

Question 19

Find the maturity dates for the following:
a)A 123-day note date March 22.
b)A 5-month note dated January 31.
c)A 75-day note dated February 21, 2012, a leap year.

Accepted Answer

a)July 23

Question 20

Interest income is on a merchandise company's income statement under the heading:

Accepted Answer

A) Sales Revenue. 
B) Other Income or Interest Income. 
C) Unearned Revenue. 
D) Notes Receivable. 
A) Sales Revenue. 
B) Other Income or Interest Income. 
C) Unearned Revenue. 
D) Notes Receivable.

Exam 14: Notes Receivable and Notes Payable

The person or company that borrows money and signs a promissory note payable is the:

A note that is not paid on the maturity date is considered dishonored.

The proceeds of a discounted note are the face value less the bank discount.

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

The amount the bank charges when it discounts a note is calculated 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). -

In the basic formula for calculating interest on a promissory note, principal refers to:

Prepare general journal entries for the Knapp Computers Company for the following transactions:

The journal entry for accrued interest on a note payable includes:

David borrows $2,000 from Matthew and gives him a promissory note. Matthew is the:

For the maker, being given additional time to settle an account with issuance of a note results in a shift of:

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

The terms payee and maker are interchangeable.

When an interest-bearing note comes due and is uncollectible, the journal entry includes:

Colo Bank accepts a promissory note for $3,000 from a customer on November 1, to be repaid in seven months plus 8% interest. The maturity value of the note is:

When a company goes to a bank and exchanges a note for cash, the process is called discounting a note.

When an account receivable is exchanged for a note receivable, a shift in assets occurs.

Find the maturity dates for the following: a)A 123-day note date March 22. b)A 5-month note dated January 31. c)A 75-day note dated February 21, 2012, a leap year.

Interest income is on a merchandise company's income statement under the heading:

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

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