PROMISSORY NOTES AND MERCHANDISING

A promissory note must contain a conditional promise or order to pay a sum certain in money.

• True

• False

A note payable is a liability that represents a written promise by the maker of the note (the debtor or the payor) to pay another party (the creditor or the payee) a specified amount at a future date.

• True
• False

On the Statement of Financial Position, a notes receivable is always considered part of the current assets.

• True

• False

The entry to record the receipt of a promissory note includes a credit to Interest Income for the amount of interest that will accrue on the note until it is paid at maturity.

• True

• False

The maturity value of an interest-bearing note is the sum of the principal amount of the note and the interest on the principal amount.

• True

• False

A dishonored promissory note is recognized by the payee as an accounts receivable.

• True

• False

On the maturity date, the amount to be received by the payee from the maker shall be equal to the face value for both interest bearing and non-interest bearing notes

• True

• False

A 105-day 5% note was issued with a face value of P10,000 on January 4. The maturity date is on

• April 19

• April 20

• April 18

• April 17

The journal entry to record the receipt of a promissory note includes a debit to Note Receivable for the

• Maturity value of the note

•  

  Face value of the note plus the interest that will accrue

• Face value less the interest that will accrue.

• Face value of the note.

Which of the following is FALSE?

• The entry to record the payment of a note payable includes a debit to the Notes Payable account

• The entry to record the issuance of a promissory note includes a credit to Interest Payable for the amount of interest that will accrue on the note until it is paid at maturity.

• The entry to record the issuance of a promissory note includes a credit to the Notes Payable account.

• The Notes Payable account is always debited or credited for the face value of the note.