IA Chapter 26 Review

The term of a note refers to:

• the legal terminology used in the document

• the time period for repayment

• the interest rate charged

• the conditions for default

To calculate the maturity date of a note, you need:

• the principal and interest rate

• the term and interest rate

• the issue date and term

• the principal and issue date

Match these terms with the correct definition.

• promissory note

• the fee charged for using money

• interest

• the total amount due at the due date

• maturity value

• a written promise to pay a specific amount of money at a certain time

Match these terms.

• note payable

• a promissory note a business accepts from a credit customer

• principle

• the original amount borrowed

• maker

• the person who promises to pay

Interest rates on a promissory note are typically stated:

• on a monthly basis

• on a weekly basis

• on an annual basis

• on a daily basis

The three factors that determine interest on a promissory note are:

• 1.principal

  2.term

  3.borrower's credit score

• 1.principal

  2.interest rate

  3.term

• 1.interest rate

  2.term

  3.collateral

• 1.principle

  2.interest rate

  3.payment schedule

Which document might be replaced by a promissory note?

• a bank statement

• a recepit

• an account receivable

• a purchase order

Match these terms correctly.

• other expense

• the cash received by the borrower in a non-interest-bearing note

• proceeds

• a note requiring principal plus interest payment at maturity

• interest-bearing note payable

• the interest expense account is classified as?

• bank discount

• the interest deducted in advance from a non-interest-bearing note

What is the normal balance for notes payable?

• debit

• asset

• credit

• neither debit nor credit

How are notes payable that extend beyond one year classified?

• short-term assets

• long-term liabilitites

• current liabilitites

• operating expenses