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Exam 14: Notes Receivable and Notes Payable

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Question 51

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If a company does not pay its note payable on the agreed upon date,the note:

A) is renewed automatically for the same period of time.
B) is discounted at a higher rate of interest.
C) is dishonored by the vendor.
D) is automatically placed in collection with an outside agency.

E) C) and D)
F) All of the above

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Question 52

Multiple Choice

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Sold merchandise (perpetual) on account would have which effect on the following categories?

A) Total Accounts Receivable would increase.
B) Total revenues would be increased.
C) Total liabilities would increase.
D) A and B would definitely occur.

E) A) and B)
F) A) and C)

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Question 53

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The discount period is the amount of time the bank holds a note that was discounted until the maturity date.

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

Calculate the simple interest and maturity value for the following: a)$10,000,10%,2 1/2 years b)$3,500,5%,9 months c)$8,000,14%,90 days

James borrowed $950 from Tracy.James promised in writing that he would repay the money to Tracy on May 13,201X.At the time of the loan,Tracy records the transaction as a(n) :

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

A $5,500,10% note dated May 20 for 78 days was discounted on June 23 at 12%.The amount of the discount (using a 360-day year) is:

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

Prepare journal entries for the following transactions for Grant Company: May 1 Purchased equipment from Knox,Inc.for $5,000 giving a 3 month 8% note Aug.1 Paid amount due on note

Marble Company discounts a customer's 10%,$7,000,90-day note dated August 1,on September 20.The discount period is 40 days,and the bank discount rate is 15%.The maturity value of the note is $7,175.The bank discount is:

The due date of a promissory note is known as the:

Johnson issues a $5,000,7%,100-day promissory note to Adam on November 1.What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year) ?

The adjusting entry for accrued interest on a notes receivable would include:

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

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

In the basic formula for calculating interest,rate refers to:

When calculating the interest on a note receivable 365 days instead of 360 days was used.This error would cause:

The journal entry to record the payment of a discounted note at maturity is a debit to Notes Payable and Interest Expense,and a credit to Cash.

A 90-day note dated July 9 would be due on October 7.