When a company borrows cash and issues an interest-bearing-note, the transaction includes
a. debiting Cash and crediting Notes Payable.
b. debiting Cash and crediting Notes Receivable.
c. debiting Cash and Interest Expense and crediting Notes Payable.
d. debiting Notes Payable and crediting Cash.
Under the allowance method, to write off an account that has been determined to be uncollectible, the entry would include
a. debiting Accounts Receivable and crediting Allowance for Bad Debts.
b. debiting Allowance for Bad Debts and crediting Accounts Receivable.
c. debiting Bad Debt Expense and crediting Allowance for Bad Debts.
d. debiting Allowance for Bad Debts and crediting Bad Debt Expense.
A journal that is not used by a business is a
a. cash flow journal.
b. purchase journal.
c. sales journal.
d. cash receipts journal.
A $6,700, 8.5% note is dated April 10 and is due in 75 days. The maturity value of the note would be
a. $6,700.00.
b. $7,100.00.
c. $6,818.65.
d. $4,075.00.
The allowance for bad debts account is contra to which of the following accounts?
a. Bad Debt Expense
b. Accounts Receivable
c. Revenue
d. Cash
The one who is to receive the specified amount of money from a note is called the
a. maker of the note.
b. discounter of the note.
c. payee of the note.
d. endorser of the note.
After aging the accounts receivable, it is estimated that $1,200 will not be collected and the allowance account has an existing credit balance of $400. If the accounts receivable total $130,000, the net receivables would be
a. $128,400.
b. $129,600.
c. $128,800.
d. $128,000.
Federal Bank of America has loaned $9,000 to Southgate Animal Hospital, using a 90-day non-interest-bearing note. The bank discounted the note at 7%. The debit to Discount on Notes Payable in the general journal will be in the amount of
a. $8,842.50.
b. $157.50.
c. $9,000.00.
d. $9,157.50.
When banks deduct interest on a note in advance, this procedure in known as
a. recording.
b. securing.
c. discounting.
d. endorsing.
On the balance sheet, any account having a balance intended to be deducted from another related account balance for financial statement purposes is known as a(n)
a. discount account.
b. contra account.
c. expense account.
d. uncollectible account.
A journal designed for entering only sales on account is called the
a. sales journal.
b. cash receipts journal.
c. cash payments journal.
d. general journal.
The direct write-off method is
a. required by generally accepted accounting principles.
b. acceptable for auditing purposes.
c. required for income tax purposes.
d. acceptable for financial reporting purposes.
Maturity value minus the discount amount is called the
a. maturity value.
b. discount.
c. proceeds.
d. principal.
Which of the following consists of the days or months from the date of issue of a note to the date of its maturity?
a. principal of the note
b. time of the note
c. discount of the note
d. rate of interest