Objective type questions on annual interest rate and accounts receivable.

1. Market, Inc. received two notes from customers for sales that it made to them in 2008. The notes included:

Note A: Dated 5/31/08, principal of $120,000 and interest due 3/31/09.

Note B: Dated 7/1/08, principal of $200,000 and interest at 8% annually, due on 4/1/09.

Market reported accrued interest receivable from these notes of $14,400 on its 12/31/08 balance sheet. What is the annual interest rate on Note A?

A. 9.14%

B. 8%

C. 9.74%

D. 9.44%

The following facts relate to Questions 2 through 4

2. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's 2008 bad debt expense is:

A. $1,720

B. $1,650

C. $1,505

D. $1,575

3. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's accounts receivable at December 31, 2008, are:

A. $467,000

B. $473,280

C. $465,280

D. $469,280

4. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's adjusted allowance for uncollectible accounts at December 31, 2008, is:

A. $1,575

B. $1,505

C. $1,650

D. $1,720

5. The largest expense on a retailer's income statement is typically:

A. Salaries and wages.

B. Cost of goods sold

C. Income tax expense

D. Depreciation expense

6. In a periodic inventory system, the cost of goods sold is determined:

A. each time a sale occurs

B. each time a purchase occurs

C. at the end of the accounting period

D. None of the above

7. In a perpetual inventory system, the cost of purchases is debited to:

A. Purchases

B. Cost of goods sold

C. Inventory

D. Accounts payable