Question 1

Which of the following accounts will be credited by the borrower when a promissory note is issued?

Accepted Answer

When a borrower issues a promissory note, it increases their liability because they are promising to pay a certain amount in the future. Therefore, the Note Payable account, which represents this liability, is credited.

Question 2

On June 30,2017,Nightvale,Inc.purchased merchandise inventory for $500,000 by signing a six-month,8% note payable.Prepare the journal entry for the payment of the note on December 30,2016.

Accepted Answer

The answer of On June 30,2017,Nightvale,Inc.purchased merchandise inventory for $500,000...

Question 3

NewAge,Inc.made total cash sales in February of $666,000,which are subject to 7.5% sales tax.Prepare the summary entry to record the transaction.

Accepted Answer

The answer of NewAge,Inc.made total cash sales in February of...

Question 4

Firewood,Inc.signed a three-year note payable for $45,000 at 13% annual interest.What is the interest expense for 2017 if the note was signed on August 1,2017? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

Accepted Answer

B)
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Question 5

A $45,000,two-month,7% note payable was issued on December 1,2016.What is the amount of interest expense recorded in the year 2017?

Accepted Answer

B)
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Question 6

On October 1,2017,Carlos,Inc.borrowed $225,000 by signing a nine-month,8% note payable.Interest was accrued on December 31,2017.Prepare the journal entry July,1,2017,the date the note was paid.

Accepted Answer

The answer of On October 1,2017,Carlos,Inc.borrowed $225,000 by signing a...

Question 7

Maywood,Inc.signs a $17,000,8.5%,six-month note dated November 1,2017.The interest expense recorded for this note in 2017 will be ________.(Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

Accepted Answer

B)
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Question 8

At the maturity of a note payable,a borrower will pay ________.

Accepted Answer

When a note payable reaches maturity, the borrower is obligated to repay the full amount of principal plus any accrued interest. Therefore, the correct choice is A - the principal plus interest.

Question 9

Jupiter Services sells service plans for commercial computer maintenance.The price for each service plan is $1,650 per year,paid in advance.On October 1,2017,a service plan was sold to a new customer for cash.Prepare the journal entry to record this transaction.

Accepted Answer

The answer of Jupiter Services sells service plans for commercial...

Question 10

When a business records accrued interest expense on a note payable ________.

Accepted Answer

Accrued interest expense on a note payable indicates that the interest amount is due but not yet paid. Therefore, Interest Payable account will be credited to show the liability and there will be no impact on the Note Payable account.

Question 11

On July 1,2017,Ferrero,Inc.purchased merchandise inventory for $350,000 by signing a note payable.The note is for 6 months and bears interest at a rate of 8%.Prepare the journal entry for this transaction,using a perpetual inventory system.

Accepted Answer

The answer of On July 1,2017,Ferrero,Inc.purchased merchandise inventory for $350,000...

Question 12

Rosewood,Inc.recently signed a $356,000,six-month note on August 22,2017.The interest rate is 12.5%.How much interest will be due at maturity?

Accepted Answer

C)$356,000 × 12.5% × 6/12 = $22,250

Question 13

If a long-term debt is paid in installments,the business will report the current portion of the note payable as a current liability.

Accepted Answer

This is true. The current portion of a long-term debt that is due within the next 12 months is reported as a current liability on the balance sheet. The remaining portion is reported as a long-term liability.

Question 14

Which of the following correctly describes the accounting treatment for interest payable?

Accepted Answer

Interest payable is a current liability, as it represents an obligation to pay interest on a loan or debt within the next 12 months. It should be shown on the balance sheet under the current liabilities section.

Question 15

On September 1,2017,Neighborhood,Inc.borrowed $125,000 by signing a nine-month,7.2% note payable.Prepare the journal entry to accrue interest expense on December 31,2016.

Accepted Answer

The answer of On September 1,2017,Neighborhood,Inc.borrowed $125,000 by signing a...

Question 16

A $37,000,three-month,11% note payable was issued on December 1,2017.What is the amount of accrued interest on December 31,2017? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

Accepted Answer

A)
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Question 17

Database Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2017,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2017 to September 30,2018.Prepare the December 31,2017 adjusting entry.

Accepted Answer

The answer of Database Services sells service plans for commercial...

Question 18

Short-term notes payable represent a written promise by the business to pay a debt,without the addition of interest,within one year or less.

Accepted Answer

Short-term notes payable often include interest, which the business agrees to pay in addition to the principal amount within one year or less.

Question 19

The journal entry for accrued interest on a note payable includes ________.

Accepted Answer

To record accrued interest on a note payable, we need to debit Interest Expense and credit Interest Payable. This is because the interest expense has been incurred but has not yet been paid, resulting in an increase in the interest owed or payable (Interest Payable). Option A is incorrect because cash is not involved in the journal entry for accrued interest. Option C is incorrect because Interest Payable is increasing, not decreasing. Option D is incorrect because Notes Payable is not affected by the accrual of interest.

Question 20

A $46,000,four-month,7% note payable was issued on October 1,2017.Which of the following would be included in the journal entry required on the note's maturity date by the borrower? (Do not round any intermediate calculations,and round your final answer to the nearest dollar. )

Accepted Answer

C)
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Quiz 11: Current Liabilities and Payroll