Question 1

The party to a promissory note that agrees to repay money on the maturity date of the note is called the

Accepted Answer

A) Lender 
B) Maker of the note 
C) Payee of the note 
D) Recipient of the note

Question 2

Satin Corporation The data presented below is for Satin Corporation for the year ended December 31,2014.
 Refer to the information for Satin Corporation.
If Satin uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Accepted Answer

A) $216,000 
B) $219,000 
C) $222,000 
D) $250,000

Question 3

On July 1,2014,Tipper Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Tipper ends at December 31,2014,what will be reported with respect to the bonds on that date?

Accepted Answer

A) The carrying value of the bonds will be $108,000. 
B) The cash received in interest will be $8,000. 
C) Interest income in the amount of $4,000 will be accrued. 
D) A loss on the bonds will be reported in the Other Income and Expense section of the 2014 income statement until the entire amount of interest is paid on June 30,2015.

Question 4

The comparative financial statements for the years ended December 31,2014 and 2013 for Sophia Company reported the following information.
  Answer these questions concerning Sophia Company's receivables:

Accepted Answer

The answer of The comparative financial statements for the years...

Question 5

What is the impact on the cash flow statement from an increase in notes receivable,assuming the indirect method is used?

Accepted Answer

A) A decrease in the cash flow from operating activities 
B) An increase in the cash flow from operating activities 
C) An increase in the cash flow from financing activities 
D) An increase in the cash flow from investing activities

Question 6

The difference between the principal amount of a note and its maturity value is called ____________________.

Accepted Answer

The answer of The difference between the principal amount of...

Question 7

Megan Farms received a promissory note from a customer on March 1,2014.The face amount of the note is $8,000;the terms are 90 days and 9% interest.At the maturity date,the customer pays the amount due for the note and interest. What entry is required on the books of Megan Farms on the maturity date assuming none of the interest had already been recognized?

Accepted Answer

A) Increase Cash,$8,000,and decrease Notes Receivable $8,000 
B) Increase Cash,$8,180,increase Interest Revenue,$180,and decrease Notes Receivable,$8,000 
C) Increase Cash $8,720,decrease Notes Receivable $8,000,and increase Interest Revenue,$720 
D) No entry is required;the customer pays the amount due to the bank

Question 8

An aging schedule typically categorizes the various accounts by the length of time each invoice is outstanding.

Accepted Answer

A) True 
 B)False

Question 9

Sliders Company
Sliders Company sells its merchandise only on credit.The following data is available at December 31,2014:
  Refer to data for Sliders Company.
Determine the balance of Accounts Receivable at December 31,2014.

Accepted Answer

The answer of Sliders Company
Sliders Company sells its merchandise only...

Question 10

Identify two methods of accelerating cash from sales.

Accepted Answer

The answer of Identify two methods of accelerating cash from...

Question 11

Verilux Company sold merchandise to Flight Corp.on November 1,2014,for $10,000.Verilux accepted a promissory note from Flight Corp.for $10,000.The note has a term of 5 months and a stated interest rate of 7%.Verilux's accounting period ends on December 31,2014. What amount should Verilux recognize as interest revenue on the maturity date of the note?

Accepted Answer

A) $ -0- 
B) $ 175.00 
C) $ 291.67 
D) $ 420.00

Question 12

On July 1,2014,Falcon Company received a $20,000 promissory note from Jordyn Company.The annual interest rate is 5%.Principal and interest are paid in cash at the maturity date of June 30,2015. If Falcon's fiscal year ends September 30,2014,an adjusting entry is needed to:

Accepted Answer

A) Increase interest revenue by $1,000 
B) Increase notes receivable by $250 
C) Increase interest receivable by $250 
D) Increase notes receivable by $1,000

Question 13

How will the payee of the promissory note record the note on its books?

Accepted Answer

A) The promissory note will be recorded as an asset 
B) The promissory note will be recorded as a liability 
C) The promissory note will be recorded as revenue 
D) The promissory note will be recorded as an expense

Question 14

Purchases and sales of cash equivalents are reported as investing activities on a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 15

For what reason would a company buy 10% of the common stock of a second company?

Accepted Answer

A) The company has idle cash and wishes to have a higher return than that available from temporary money market investments. 
B) The company wishes to insure a steady source of goods from the second company. 
C) The company wishes to prepare consolidated financial statements. 
D) More than one of the above is correct.

Question 16

Over the life of a note,the maker of a note recognizes ____________ on the balance sheet and _____________ on the income statement.

Accepted Answer

The answer of Over the life of a note,the maker...

Question 17

Which one of the approaches for the allowance method of accounting for bad debts emphasizes matching bad debts expense with revenue on the income statement?

Accepted Answer

A) The percentage of accounts receivable approach 
B) The percentage of net credit sales approach 
C) The direct write-off method 
D) The uncollectible approach

Question 18

Why does the discounting of a note receivable with recourse result in a contingent liability? Should the liability be reported on the balance sheet? Explain.

Accepted Answer

The answer of Why does the discounting of a note...

Question 19

Tippi Corp.invested cash in a 9-month certificate of deposit (CD)on October 1,2014.If Tippi has an accounting period which ends on December 31,2014,when would it most likely recognize interest revenue from the CD?

Accepted Answer

A) On December 31,2014 only 
B) On July 1,2013 only 
C) Both Dec.31,2014 and July 1,2013 
D) On October 1,2014

Question 20

The entry required to recognize the bad debts expense for 2014 will act to:

Accepted Answer

A) Increase total assets and retained earnings 
B) Decrease total assets and retained earnings 
C) Decrease total assets and increase net income 
D) Increase total assets and decrease net income

Exam 7: Receivables and Investments