Question 1

The amount of cash paid at maturity date on a $12,000 face value, 90-day note bearing interest at 10% is

Accepted Answer

A)  $1,200 
B)  $12,000 
C)  $300 
D)  $12,300 12000 x 90/360 x .10 = 300; 12000 + 300 = 12300.

Question 2

On October 10, 2011, the Berkeley Company accepted a 60-day, 9 percent note from Devon Reed in settlement of his past-due account for $3,000. On November 9, Berkeley Company discounted the note at the Security Bank. The bank charged a discount rate of 12 percent. Answer the following questions. (round your answers to 2 decimal places)
1. What is the maturity date of the note?
2. What is the maturity value of the note?
3. How many days are in the discount period?
4. What is the amount of the discount?
5. What is the amount of the proceeds?

Accepted Answer

The answer of On October 10, 2011, the Berkeley Company...

Question 3

On July 5, 2011, the Cowens Company accepted a 90-day, 10 percent note from Rhonda Ballard in settlement of his past-due account for $5,000. On Aug. 4, the Cowens Company discounted the note at the Investment Capital Bank. The bank charged a discount rate of 6 percent. Answer the following questions.
1. What is the maturity date of the note?
2. What is the maturity value of the note?
3. How many days are in the discount period?
4. What is the amount of the discount?
5. What is the amount of the proceeds?

Accepted Answer

The answer of On July 5, 2011, the Cowens Company...

Question 4

Which of the following statements is not correct?

Accepted Answer

A)  When a note receivable is discounted, the proceeds are computed by subtracting the discount from the maturity value of the note. 
B)  The entry to record the discounting of a note receivable may result in the recognition of interest expense. 
C)  When a note is discounted at a bank, the proceeds are always less than the maturity value of the note. 
D)  When a note receivable is discounted at a bank, the entry to record the transaction includes a debit to cash.

Question 5

The Interest Income account

Accepted Answer

A)  usually has a credit balance. 
B)  is usually shown in the Current Assets section of the balance sheet. 
C)  is debited when the firm records the effects of a dishonored note receivable. 
D)  is credited when the firm accepts a note receivable from a customer.

Question 6

How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year?

Accepted Answer

A)  $300 
B)  $450 
C)  $900 
D)  $1,800 20,000 x 60/360 x 9% = $300.

Question 7

A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. To record this transaction, the accountant would debit

Accepted Answer

A)  Equipment for $6,000 and credit Notes Payable for $6,000. 
B)  Equipment for $6,180, credit Interest Expense for $180, and credit Notes Payable for $6,000. 
C)  Equipment for $6,000, debit Interest Expense for $180, and credit Notes Payable for $6,180. 
D)  Equipment for $6,000 and credit Accounts Payable for $6,000.

Question 8

A 3-month note payable is classified as a(n) ____________________ liability on the balance sheet.

Accepted Answer

The answer of A 3-month note payable is classified as...

Question 9

Compute the amount of interest owed on a 3-month, 7 percent note for $12,000.

Accepted Answer

The answer of Compute the amount of interest owed on...

Question 10

The Woo Corporation had the following transactions involving notes payable during 2013. Record the transactions on page 8 of a general journal. Omit descriptions.

Accepted Answer

The answer of The Woo Corporation had the following transactions...

Question 11

Find the due date of a 30-day note issued on November 10, 2010.

Accepted Answer

The answer of Find the due date of a 30-day...

Question 12

Notes Receivable Discounted represents a(n) ____________________ liability.

Accepted Answer

The answer of Notes Receivable Discounted represents a(n) ____________________ liability....

Question 13

A one-month note dated October 15, would be due on November

Accepted Answer

A)  14. 
B)  15. 
C)  16. 
D)  17. One month note due on the same day exactly one month later.

Question 14

On January 1, a firm purchased equipment for $10,000, signing a 30-day note bearing interest at 12 percent a year. The entry to record the payment of the amount due on January 31 will include a debit to Notes Payable for

Accepted Answer

A)  $10,000 and a credit to Cash for $10,000. 
B)  $10,100 and a credit to Cash for $10,100. 
C)  $10,000, a debit to Interest Expense for $1,200, and a credit to Cash for $11,200. 
D)  $10,000, a debit to Interest Expense for $100, and a credit to Cash for $10,100.

Question 15

If a note is not paid at maturity, it is said to be __________________.

Accepted Answer

The answer of If a note is not paid at...

Question 16

Interest Income is classified as a current asset.

Accepted Answer

A) True 
 B)False

Question 17

The Gaynor Company had the following transactions involving notes payable during 2011. Record the transactions on page 5 of a general journal. Omit descriptions.

Accepted Answer

The answer of The Gaynor Company had the following transactions...

Question 18

The Hernandez Company had the following transactions involving notes receivable during 2011. Record the transactions on page 6 of a general journal. Omit descriptions. July $1 \quad$ Received a 3-month, 8 percent note for $\$ 9,000$ from Lincoln Company, a customer whose account was overdue.
October 1$\quad$ The note issued by Lincoln Company was dishonored today.

Accepted Answer

The answer of The Hernandez Company had the following transactions...

Question 19

Notes Receivable Discounted is usually shown in the Current Liabilities section of the balance sheet.

Accepted Answer