Question 1

Compute the amount of interest owed on a 4-month,6 percent note for $7,000.

Accepted Answer

$140

Question 2

Even if an interest-bearing note receivable is dishonored,interest income due on the note should be recorded.

Accepted Answer

A) True 
 B)False  True

Question 3

On March 1,a firm purchased equipment for $5,000,signing a 30-day note bearing interest at 12 percent a year.The entry to record the payment of the amount due on March 31 will include a debit to Notes Payable for

Accepted Answer

A)   $5,050 and a credit to Cash for $5,050.
B)   $5,000 and a credit to Cash for $5,000.
C)   $5,000,a debit to Interest Expense for $50,and a credit to Cash for $5,050.
D)   $5,000,a debit to Interest Expense for $600,and a credit to Cash for $5,600.E) C) and D)
F) A) and B)

Question 4

Interest Expense usually appears on the income statement as a nonoperating expense.

Accepted Answer

A) True 
 B)False

Question 5

A firm purchased equipment for $12,000 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 $12,000 and credit Accounts Payable for $12,000.
B)   Equipment for $12,000 and credit Notes Payable for $12,000.
C)   Equipment for $12,360,credit Interest Expense for $360,and credit Notes Payable for $12,000.
D)   Equipment for $12,000,debit Interest Expense for $360,and credit Notes Payable for $12,360.E) C) and D)
F) B) and C)

Question 6

A ____________________ draft is a commercial draft that is payable during a specified period of time.

Accepted Answer

The answer of A ____________________ draft is a commercial draft...

Question 7

An ordinary check is one form of draft.

Accepted Answer

A) True 
 B)False

Question 8

If the amount due on a note receivable is not collected at maturity,

Accepted Answer

A)   Allowance for Doubtful Accounts should immediately be debited.
B)   the note is said to be dishonored.
C)   the face value of the note should continue to be carried in the Notes Receivable account until all possible means of collecting the note have been exhausted.
D)   Uncollectible Accounts Expense should be debited.E) All of the above
F) B) and D)

Question 9

The maturity value of a 90-day note for $8,000 that bears interest at 10 percent a year is

Accepted Answer

A)   $7,800.
B)   $8,000.
C)   $8,200.
D)   $8,800.E) B) and C)
F) B) and D)

Question 10

When a note receivable is discounted,the net proceeds are computed by subtracting the discount charges from the ____________________ value of the note.

Accepted Answer

The answer of When a note receivable is discounted,the net...

Question 11

A _______________ is a business document that lists the goods accepted for transportation by a carrier.

Accepted Answer

The answer of A _______________ is a business document that...

Question 12

Compute the maturity value of a 4-month,7 percent note with a face value of $4,000.(round answer to 2 decimal places)

Accepted Answer

The answer of Compute the maturity value of a 4-month,7...

Question 13

Since notes receivable are negotiable,internal control procedures must be devised to protect them against fraud and theft.

Accepted Answer

A) True 
 B)False  True

Question 14

The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is

Accepted Answer

A)   $4,400.
B)   $4,100.
C)   $4,000.
D)   $3,900.E) None of the above
F) All of the above

Question 15

Interest Expense is usually classified as a(n)____________________ expense on the income statement.

Accepted Answer

The answer of Interest Expense is usually classified as a(n)____________________...

Question 16

When a note payable is ___________________,the lender deducts interest on the loan in advance and the borrower receives only the difference between the face amount of the note and the interest on it to maturity.

Accepted Answer

The answer of When a note payable is ___________________,the lender...

Question 17

Compute the amount of interest owed on a 6-month,9 percent note for $6,000.

Accepted Answer

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

Question 18

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.E) B) and C)
F) All of the above

Question 19

How much interest will accrue on a $20,000 face value,120-day note that bears interest at 9 percent a year?

Accepted Answer

A)   $600
B)   $900
C)   $1,800
D)   $3,600E) A) and C)
F) B) and C)

Question 20

The Jiminez Company accepted an interest-bearing note to settle a past-due account originating from a sale of merchandise.When the note is collected,the interest earned should be credited to

Accepted Answer

A)   Interest Income.
B)   Sales.
C)   Allowance for Doubtful Accounts.
D)   Notes Receivable.E) B) and C)
F) A) and B)

Exam 16: Notes Payable and Notes Receivable

Compute the amount of interest owed on a 4-month,6 percent note for $7,000.

Correct Answerverified$140

Even if an interest-bearing note receivable is dishonored,interest income due on the note should be recorded.

Correct AnswerverifiedTrue

On March 1,a firm purchased equipment for $5,000,signing a 30-day note bearing interest at 12 percent a year.The entry to record the payment of the amount due on March 31 will include a debit to Notes Payable for

Correct AnswerverifiedShow Answer

Interest Expense usually appears on the income statement as a nonoperating expense.

Correct AnswerverifiedShow Answer

A firm purchased equipment for $12,000 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

Correct AnswerverifiedShow Answer

A ____________________ draft is a commercial draft that is payable during a specified period of time.

Correct AnswerverifiedShow Answer

An ordinary check is one form of draft.

Correct AnswerverifiedShow Answer

If the amount due on a note receivable is not collected at maturity,

Correct AnswerverifiedShow Answer

The maturity value of a 90-day note for $8,000 that bears interest at 10 percent a year is

Correct AnswerverifiedShow Answer

When a note receivable is discounted,the net proceeds are computed by subtracting the discount charges from the ____________________ value of the note.

Correct AnswerverifiedShow Answer

A _______________ is a business document that lists the goods accepted for transportation by a carrier.

Correct AnswerverifiedShow Answer

Compute the maturity value of a 4-month,7 percent note with a face value of $4,000.(round answer to 2 decimal places)

Correct AnswerverifiedShow Answer

Since notes receivable are negotiable,internal control procedures must be devised to protect them against fraud and theft.

Correct AnswerverifiedTrue

The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is

Correct AnswerverifiedShow Answer

Interest Expense is usually classified as a(n)____________________ expense on the income statement.

Correct AnswerverifiedShow Answer

When a note payable is ___________________,the lender deducts interest on the loan in advance and the borrower receives only the difference between the face amount of the note and the interest on it to maturity.

Correct AnswerverifiedShow Answer

Compute the amount of interest owed on a 6-month,9 percent note for $6,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How much interest will accrue on a $20,000 face value,120-day note that bears interest at 9 percent a year?

Correct AnswerverifiedShow Answer

The Jiminez Company accepted an interest-bearing note to settle a past-due account originating from a sale of merchandise.When the note is collected,the interest earned should be credited to

Correct AnswerverifiedShow Answer

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