Adv Actg Ch. 14

The interest rate state on a note for 90 days is:

• stated on a daily basis

• stated on a monthly basis

• stated on an annual basis

• indeterminable

The basic formula for calculating the interest on a note is:

• Interest = Principal x Rate x Time

• Interest = (Principal x Rate) - Time

• Interest = (Principal x Time) + Rate

• Interest = Principal x Rate/Time

The proceeds from discounting a note receivable are the

• principal + discount

• maturity value - discount

• principal - discount

• maturity value - principal

When an interest bearing note comes due and it uncollectable, the journal entry includes:

• debiting Notes Receivable; crediting A/R

• debiting Notes Receivable; crediting A/R and Interest Revenue

• debiting A/R; crediting Interest Revenue

• debiting A/R; crediting Notes Receivable and Interest Revenue

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

• is renewed automatically for the same period of time

• is discounted at a higher rate of interest

• is dishonored by the vendor

• is automatically placed in collection with an outside agency

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

• maturity value

• maturity date

• notes period

• discount period

A formal written promise by a borrower to pay a certain sum at a fixed date is:

• Notes Payable

• Promissory Note

• Contingent Liability

• Principal

The failure of the maker to pay the maturity value of a note when due.

• dishonored note

• promissory note

• default

• contingent liability

Maturity value is Principal + Discount

• True

• False

• Not this one

• Or this one

In computing interest, it is required to consider a 365-day calendar.

• True

• False

• Not this one

• Or this one