Question 1

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.

Accepted Answer

The answer of Scott Moore is considering accepting a $10,000,60-day,12%...

Question 2

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).
-$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Column 1 } & \text { Column } 2 & \text { Column } 3 & \text { Column } 4 \
\hline \begin{array} { l } 
\text { Accounts } \
\text { payable }
\end{array} & & & & \
\hline
\end{array}$

Accepted Answer

The answer of For each of the following, identify in...

Question 3

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.

Question 4

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.

Question 5

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.

Question 6

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.

Question 7

Prepare journal entries for the following transactions for Grant Company:
 $\text {May 1}$  $\quad $$\text {Purchased equipment from Krox, Inc. for $\$ 2,060$ giving a 2-month $6 \%$ note}$
$\text {July I}$ $\quad $  $\text {Paid amount due on rote}$

Accepted Answer

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

Question 8

Given the following accounts:
[1]	Cash
[2]	Notes receivable
[3]	Accounts receivable
[4]	Interest receivable
[5]	Notes payable
[6]	Accounts payable
[7]	Interest payable
[8]	Discount on notes payable
[9] 	Interest expense
[10]	Interest income
[11]	Sales
Indicate the account(s) to be debited and credited to record the following transactions.
-A promissory note received in granting a time extension to a charge customer.
Debit ________ & ________ Credit ________ & ________

Accepted Answer

The answer of Given the following accounts:
[1]	Cash
[2]	Notes receivable
[3]	Accounts receivable
[4]	Interest receivable
[5]	Notes...

Question 9

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.

Question 10

Ross,immediately after receiving a note from a customer,discounted it at the bank and received the proceeds.Ross's entry on his books would be to:

Accepted Answer

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

Question 11

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

Accepted Answer

The answer of Why is the effective rate of interest...

Question 12

Given a 360-day year,the interest expense on a $7,300,8%,77-day promissory note payable is:

Accepted Answer

A) $584.00. 
B) $459.09. 
C) $124.91. 
D) some other amount.

Question 13

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

Accepted Answer

A) 7)84%. 
B) 8)00%. 
C) 8)16%. 
D) 8)84%.

Question 14

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.

Question 15

A $6,500,12% note dated April 23 for 88 days was discounted on June 2 at 14%.The number of days in the discount period is:

Accepted Answer

A) 88 days. 
B) 48 days. 
C) 40 days. 
D) some other number.

Question 16

The maturity value of a $3,000,12%,6-month note is:

Accepted Answer

A) $360. 
B) $3,600. 
C) $3,000. 
D) $3,180.

Question 17

When Major endorsed customer Minor's note to Story County Bank,Major agreed to pay the note at maturity if Minor failed to pay.Major's liability is a(n):

Accepted Answer

A) contra-liability. 
B) absolute liability. 
C) contingent liability. 
D) regular liability.

Question 18

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.

Question 19

Bill's Bikes discounts a 90-day,8%,$4,000 note at a bank at 12%.The discount period is 50 days.It records the proceeds as:

Accepted Answer

A) debit Cash $4,012; credit Notes Receivable $4,000; credit Interest Income $12. 
B) debit Cash $4,160; credit Notes Receivable $4,080; credit Interest Income $80. 
C) debit Cash $4,068,credit Notes Receivable $4,000; credit Interest Income $68. 
D) debit Cash $4,012; credit Notes Receivable $4,000,credit Interest Expense $12.

Question 20

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.

Exam 14: Notes Receivable and Notes Payable