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Chapter Quiz
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1
The maturity date of a note is the date on which the note is issued.
A)True
B)False
2
The maturity date of a 90-day note dated March 3 is March 3.
A)True
B)False
3
The maturity value of a non-discounted note is its face value.
A)True
B)False
4
When a firm borrows money from a bank and the bank collects the interest in advance, the funds that the firm receives are called the proceeds.
A)True
B)False
5
The net amount available to the borrower who discounts a $1,200 note at a discount rate of 10 percent for 90 days is $1,190.
A)True
B)False
6
When a note receivable held by the payee is dishonored, the payee records the interest expense incurred.
A)True
B)False
7
The contingent liability on a note receivable discounted at a bank continues until the due date of the note.
A)True
B)False
8
When a note received from a charge customer is renewed, an entry does not need to be made debiting Notes Receivable and crediting Notes Receivable.
A)True
B)False
9
If the proceeds from discounting a note receivable are more than the face value of the note, Interest Income will be credited for the excess of the proceeds over the principal or face value.
A)True
B)False
10
If the end of the fiscal period is December 31, and interest has accrued for 12 days on a $1000, 9%, 120 day note, the amount of interest to accrue is $3
A)True
B)False
11
Once a note receivable comes due and is not collected, the maker still owes the principal plus interest.
A)True
B)False
12
If the end of the fiscal period is December 31, and interest has accrued for 21 days on a $1000, 8%, 120 day note, the amount of interest to accrue is $4.67 (rounded)
A)True
B)False
13
On July 20, a company issues a 90-day, $20,000 note payable at 10% annual interest to purchase new equipment. The entry to record this issuance would include a debit to Accounts Receivable.
A)True
B)False
14
On July 20, a company issues a 90-day, $20,000 note payable at 10% annual interest to purchase new equipment. The entry to record the payment of the note would include a debit to Interest Expense for $500.
A)True
B)False
15
The times interest earned ratio reflects a company's ability to pay interest obligations.
A)True
B)False
16
Which of the following is (are) the required element(s) needed to determine the interest on a note?
A)principal
B)time
C)rate
D)all of these
E)none of these
17
The party signing a promissory note is called
A)the promisee.
B)the assignee.
C)the payee.
D)the maker.
E)none of these.
18
The interest on an $8,000, 90-day, 10 percent note is
A)$20.
B)$197.26
C)$200.
D)$205.
E)none of these.
19
A 90-day note dated March 30 becomes due on
A)June 26.
B)June 28.
C)June 27.
D)June 25.
E)none of these.
20
The adjusting entry in the current year for interest on a note given to the payee but not maturing until the next year is
A)debit Interest Expense and credit Interest Income.
B)debit Interest Receivable and credit Interest Income.
C)debit Interest Expense and credit Cash.
D)debit Interest Expense and credit Interest Payable.
E)none of these.
21
The account Discount on Notes Payable is listed on which of the following financial statements:
A)Income Statement.
B)Worksheet.
C)Statement of Owner's Equity.
D)Balance Sheet.
E)none of these.
22
A note payable due in ninety days would be listed on the balance sheet under the following classification:
A)Plant and Equipment.
B)Long-Term Liabilities.
C)Current Assets.
D)Current Liabilities.
E)none of these.
23
The classification and normal balance of Discount on Notes Payable is
A)a liability with a credit balance.
B)a contra liability with a debit balance.
C)an asset with a credit balance.
D)an asset with a debit balance.
E)none of these.
24
The entry to record the payment of an interest-bearing promissory note is
A)debit Interest Expense and credit Cash.
B)debit Notes Payable and credit Cash.
C)debit Interest Expense, debit Notes Payable, and credit Cash.
D)debit Notes Payable, credit Interest Payable, and credit Cash.
E)none of these.
25
The adjusting entry for an interest bearing note payable issued at face value and maturing after the end of the year is
A)debit Notes Payable and credit Interest Expense.
B)debit Interest Expense and credit Interest Payable.
C)credit Interest Expense and debit Interest Payable.
D)debit Notes Payable and credit Interest Expense.
E)none of these.
26
The entry to record the receipt of a note from a charge customer in settlement of an open account is
A)debit Notes Receivable, credit Accounts Receivable.
B)debit Notes Payable, credit Accounts Receivable.
C)debit Accounts Receivable, credit Notes Receivable.
D)debit Accounts Receivable, credit Notes Payable.
E)none of these.
27
A Note Receivable due in 120 days would be listed on a balance sheet under the classification
A)Long-Term Liabilities.
B)Current Assets.
C)Plant and Equipment.
D)Current Liabilities.
E)of none of these.
28
An $18,000, 60-day, 10.5 percent note, dated August 15, is received from a charge customer. The maturity value of the note is
A)$10,310.68.
B)$19,890.
C)$18,000.
D)$18,315.
E)none of these.
29
The interest on a $16,000, 8.5 percent, 45-day note receivable dated September 15 is
A)$170.00.
B)$13.97.
C)$14.17.
D)$167.67
E)none of these.
30
Assuming a $15,000, 10.5 percent, 60-day note receivable dated August 2 is discounted at a bank on August 22, at 10 percent, the proceeds are
A)$15,351.53.
B)$15,347.29.
C)$15,262.50.
D)$15,092.92.
E)none of these.





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