Question 1

The notes receivable sold to a bank or finance company to raise finance are called dishonored notes receivable.

Accepted Answer

A) True 
 B)False

Question 2

A notes receivable is classified as a long-term asset if the repayment period is shorter than a year.

Accepted Answer

A) True 
 B)False

Question 3

A company accepts a 60-day, 10 percent, $900 note in settlement of an account. Assume a 360-day year. Which of the following is the maturity value of the note?

Accepted Answer

A)  $915 
B)  $900 
C)  $990 
D)  $15 
A)  $915 
B)  $900 
C)  $990 
D)  $15

Question 4

Springz Company received a 120-day, 9 percent note for $1,200, dated March 18, from Jenny, a charge customer, to satisfy his open account receivable. Which of the following journal entries records the receipt of the note in the general journal of Springz Company?

Accepted Answer

A)  Debit Notes Receivable by $1,236; credit Accounts Receivable, Jenny by $1,200, Interest Income by $36 
B)  Debit Cash by $1,200; credit Accounts Receivable, Jenny by $1,200 
C)  Debit Notes Receivable by $1,200; credit Accounts Receivable, Jenny by $1,200 
D)  Debit Notes Receivable by $1,164; credit Accounts Receivable, Jenny by $1,164 
A)  Debit Notes Receivable by $1,236; credit Accounts Receivable, Jenny by $1,200, Interest Income by $36 
B)  Debit Cash by $1,200; credit Accounts Receivable, Jenny by $1,200 
C)  Debit Notes Receivable by $1,200; credit Accounts Receivable, Jenny by $1,200 
D)  Debit Notes Receivable by $1,164; credit Accounts Receivable, Jenny by $1,164

Question 5

If a supplier accepts a note for all or part of the amount due, the company gets an extension of time for the payment.

Accepted Answer

A) True 
 B)False

Question 6

Vast Company signed a 180-day note, dated March 1, for $4,500 that Rationale Bank discounted at 10 percent. Which of the following journal entries records the payment of the note to the bank at maturity for Vast Company?

Accepted Answer

A)  Debit Notes Payable by $4,275; credit Cash by $4,275 
B)  Debit Notes Payable by $4,500; credit Cash by $4,500 
C)  Debit Interest Expense by $225; credit Cash by $225 
D)  Debit Notes Payable by $4,275, Interest Expense by $225; credit Cash by $4,500 
A)  Debit Notes Payable by $4,275; credit Cash by $4,275 
B)  Debit Notes Payable by $4,500; credit Cash by $4,500 
C)  Debit Interest Expense by $225; credit Cash by $225 
D)  Debit Notes Payable by $4,275, Interest Expense by $225; credit Cash by $4,500

Question 7

The formula that follows is used to calculate the interest that a maker of a note pays.
Interest = Principal of Note × Rate of Interest × Time of Note

Accepted Answer

A) True 
 B)False

Question 8

Rock Company borrows $4,000 for 120 days from National Bank on March 18. The bank charged a discount rate of 6 percent. Assume a 360-day year. Which of the following journal entries records the transaction on March 18 for Rock Company?

Accepted Answer

A)  Debit Cash by $3,920; credit Notes Payable by $3,920 
B)  Debit Interest Expense by $80; credit Notes Payable by $80. Principal is recorded at maturity. 
C)  Debit Cash by $4,000; credit Notes Payable by $4,000. Interest expense is recorded at maturity. 
D)  Debit Cash by $3,920, debit Interest Expense by $80; credit Notes Payable by $4,000 
A)  Debit Cash by $3,920; credit Notes Payable by $3,920 
B)  Debit Interest Expense by $80; credit Notes Payable by $80. Principal is recorded at maturity. 
C)  Debit Cash by $4,000; credit Notes Payable by $4,000. Interest expense is recorded at maturity. 
D)  Debit Cash by $3,920, debit Interest Expense by $80; credit Notes Payable by $4,000

Question 9

Which of the following is the first step of the procedure to handle discounted notes receivable?

Accepted Answer

A)  ​Diagram the situation. 
B)  ​Determine the discount period. 
C)  ​Record the formula. 
D)  Complete the formula. 
A)  ​Diagram the situation. 
B)  ​Determine the discount period. 
C)  ​Record the formula. 
D)  Complete the formula.

Question 10

A bank discounts a note payable by deducting interest in advance.

Accepted Answer

A) True 
 B)False

The notes receivable sold to a bank or finance company to raise finance are called dishonored notes receivable.

A notes receivable is classified as a long-term asset if the repayment period is shorter than a year.

A company accepts a 60-day, 10 percent, $900 note in settlement of an account. Assume a 360-day year. Which of the following is the maturity value of the note?

Springz Company received a 120-day, 9 percent note for $1,200, dated March 18, from Jenny, a charge customer, to satisfy his open account receivable. Which of the following journal entries records the receipt of the note in the general journal of Springz Company?

If a supplier accepts a note for all or part of the amount due, the company gets an extension of time for the payment.

Vast Company signed a 180-day note, dated March 1, for $4,500 that Rationale Bank discounted at 10 percent. Which of the following journal entries records the payment of the note to the bank at maturity for Vast Company?

The formula that follows is used to calculate the interest that a maker of a note pays. Interest = Principal of Note × Rate of Interest × Time of Note

Rock Company borrows $4,000 for 120 days from National Bank on March 18. The bank charged a discount rate of 6 percent. Assume a 360-day year. Which of the following journal entries records the transaction on March 18 for Rock Company?

Which of the following is the first step of the procedure to handle discounted notes receivable?

A bank discounts a note payable by deducting interest in advance.

Asset, Liability, Owners Equity, Revenue, and Expense Accounts

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

The General Journal and the General Ledger

Adjusting Entries and the Work Sheet

Closing Entries and the Post-Closing Trial Balance

Bank Accounts, Cash Funds, and Internal Controls

Employee Earnings and Deductions

Employer Taxes, Payments, and Reports

Sales and Purchases

Cash Receipts and Cash Payments

Work Sheet and Adjusting Entries

Financial Statements, Closing Entries, and Reversing Entries

Methods of Depreciation

Bad Debts

Inventory Methods

Filters

Exam 16: Notes Receivablenotes Payable

The notes receivable sold to a bank or finance company to raise finance are called dishonored notes receivable.

A notes receivable is classified as a long-term asset if the repayment period is shorter than a year.

A company accepts a 60-day, 10 percent, $900 note in settlement of an account. Assume a 360-day year. Which of the following is the maturity value of the note?

Springz Company received a 120-day, 9 percent note for $1,200, dated March 18, from Jenny, a charge customer, to satisfy his open account receivable. Which of the following journal entries records the receipt of the note in the general journal of Springz Company?

If a supplier accepts a note for all or part of the amount due, the company gets an extension of time for the payment.

Vast Company signed a 180-day note, dated March 1, for $4,500 that Rationale Bank discounted at 10 percent. Which of the following journal entries records the payment of the note to the bank at maturity for Vast Company?

The formula that follows is used to calculate the interest that a maker of a note pays. Interest = Principal of Note × Rate of Interest × Time of Note

Rock Company borrows $4,000 for 120 days from National Bank on March 18. The bank charged a discount rate of 6 percent. Assume a 360-day year. Which of the following journal entries records the transaction on March 18 for Rock Company?

Which of the following is the first step of the procedure to handle discounted notes receivable?

A bank discounts a note payable by deducting interest in advance.

Asset, Liability, Owners Equity, Revenue, and Expense Accounts

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

The General Journal and the General Ledger

Adjusting Entries and the Work Sheet

Closing Entries and the Post-Closing Trial Balance

Bank Accounts, Cash Funds, and Internal Controls

Employee Earnings and Deductions

Employer Taxes, Payments, and Reports

Sales and Purchases

Cash Receipts and Cash Payments

Work Sheet and Adjusting Entries

Financial Statements, Closing Entries, and Reversing Entries

Methods of Depreciation

Bad Debts

Inventory Methods

Filters