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5) Allied Inc. has an Account Receivable balance of $27,500 and its Allowance for Uncollectible
Accounts balance is $1,250. How will this be reported on the Balance Sheet?
A) Accounts Receivable 27,500
Less: Allowance for Uncollectible Accounts 1,250
Accounts Receivable, Net $26,250
B) Accounts Receivable $26,250
C) Accounts Receivable, Net of Allowance for Uncollectible Accounts of $1,250 $26,250
D) Both A and C are acceptable ways to report Accounts Receivable.
Question Type: Application
6) Snow Productions, Inc. reports a balance of $28,000 in Accounts Receivable and $3,450 in the
Allowance for Uncollectible Accounts. What is the net realizable value of the receivables?
A) $3,450
B) $24,550
C) $28,000
D) $31,450
Question Type: Application
7.6 Account for notes receivable
1) A promissory note is a verbal promise to pay a specified amount of money on a particular
future date.
Question Type: Concept
2) The business or person that signs the promissory note and agrees to pay the required amount is
called the payee.
3) The amount loaned out by the payee is called the maturity value.
Question Type: Concept
4) The maturity value is the sum of the principal plus the interest due at maturity.
Question Type: Concept
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5) Interest is an expense to the debtor and income to the creditor.
Question Type: Concept
6) Interest rates are almost always stated for a period of one month.
Question Type: Concept
7) A 4-month promissory note dated on July 17 will be due on November 17.
Question Type: Application
8) The payee of a note is also called the creditor.
Question Type: Concept
9) When counting the days of a note, one should remember to count the day the note was issued.
Question Type: Concept
10) Using a 360-day year, the maturity value of a 60-day note for $5,000 at 8% annual interest is
$67.
Question Type: Application
11) Using a 360-day year, the maturity value of a 90-day note for $42,000 at 8% annual interest
is:
A) $45,360.00.
B) $3,360.00.
C) $42,840.00.
D) $42,000.00.
Question Type: Application
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12) Using a 360-day year, the maturity value of a 60-day note for $24,000 at 7% annual interest
is (rounded to the nearest cent):
A) $24,000.00.
B) $23,720.00.
C) $24,280.00.
D) $280.00.
Question Type: Application
13) Using a 365-day year, the maturity value of a 180-day note for $3,000 at 9% annual interest
is: (Do not round any intermediary calculations. Round your final answer to the nearest cent.)
A) $2,866.85.
B) $133.15.
C) $3,133.15.
D) $270.00.
Question Type: Application
14) A 135-day note issued on May 17 will mature on:
A) September 28.
B) September 29.
C) September 30.
D) October 1.
Question Type: Application
15) An 83-day note issued on November 13, 2014 will mature on:
A) February 2, 2015.
B) February 3, 2015.
C) February 4, 2015.
D) February 5, 2015.
Question Type: Application
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16) On September 1, 2013, Sharp Corp. lent $2,400 to Marla Smith on a 6-month 4% promissory
note. The journal entry to record the note for Sharp Corp. would be to:
A) debit Note Receivable/M Smith, $2,400; credit Cash, $2,400.
B) debit Note Receivable/M Smith, $2,448; credit Cash, $2,448.
C) debit Note Receivable/M Smith, $48; credit Interest Income, $48.
D) debit Cash, $2,400; credit Note Payable/M Smith, $2,400.
Question Type: Application
17) On September 1, 2013, Sharp Corp. lent $2,400 to Marla Smith on a 6-month 10%
promissory note. The amount of interest to be accrued on December 31 will be:
A) $240.
B) $1,440.
C) $120.
D) $80.
Question Type: Application
18) On March 1, 2014, Archer Inc. lent $37,000 to Ron Wood on a 1–year 3% promissory note.
The amount of interest to be accrued on December 31 will be: (Do not round any intermediary
calculations. Round your final answer to the nearest cent.)
A) $1,110.00.
B) $925.00.
C) $37,000.00.
D) $740.00.
Question Type: Application
19) On August 9, Alice paid $3,568 to Cyrus Corp. to fulfill her promissory note agreement. Of
the $3,568, $400 is interest. The journal entry Cyrus Corp. will record is to:
A) debit Cash, $3,568; credit Note Receivable/Alice, $3,568.
B) debit Cash, $3,568; credit Note Receivable/Alice, $3,168; credit Interest Revenue, $400.
C) debit Note Receivable/Alice, $3,568; credit Cash $3,168; credit Interest Revenue, $400.
D) debit Note Receivable/Alice, $3,568; credit Cash $3,568.
Question Type: Application
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20) On March 15, Diego paid $7,750 to Island, Inc. to fulfill his promissory note agreement. Of
the $7,750, $750 is interest. The journal entry Island, Inc. will record is to:
A) debit Cash, $7,750; credit Note Receivable/Diego, $7,750.
B) debit Cash, $7,750; credit Note Receivable/Diego, $7,000; credit Interest Revenue, $750.
C) debit Note Receivable/Diego, $7,750; credit Cash $7,000; credit Interest Revenue $750.
D) debit Note Receivable/Diego, $7,750; credit Cash $7,750.
Question Type: Application
21) Magick, Inc. converted a $5,000 account receivable from Ronaldo to a 75–day, 7% note
receivable. The maturity value (assume a 360-day year) that will be due from Ronaldo in 75 days
is: (Do not round any intermediary calculations. Round your final answer to the nearest cent.)
A) $5,000.
B) $5,073.
C) $5,350.
D) some other number.
Question Type: Application
22) TLR Corporation lent $32,000 to Blitz, Inc. for 75 days at 7% interest on November 22,
2013. How much interest will have accrued to TLR Corporation on December 31, 2013,
assuming a 360-day year? (Do not round any intermediary calculations. Round your final answer
to the nearest cent.)
A) $2,240.00
B) $242.67
C) $466.67
D) Some other number
Question Type: Application
23) Using a 365-day year, the maturity value of a 55-day, 6% note for $22,000 rounded to the
nearest cent is: (Do not round any intermediary calculations. Round your final answer to the
nearest cent.)
A) $22,000.00.
B) $22,198.90.
C) $21,801.10.
D) $23,320.00.
Question Type: Application
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24) A customer‘s written promise to pay an amount of money to a business with interest is a(n)
________ of the business.
A) account receivable
B) account payable
C) note receivable
D) note payable
Question Type: Concept
25) The formula: principle x rate x time represents
A) The amount charged for loaning money.
B) The amount of revenue to the creditor for loaning money.
C) The amount of expense to the debtor for borrowing money.
D) All of the above.
Question Type: Concept
26) The entity that signs the note and promises to pay the required amount is referred to as:
A) maker of a note
B) payee of a note
C) debtor
D) both A and C
Question Type: Concept
27) Principal is the amount loaned out by the ________ and borrowed by the ________.
A) payee of a note, creditor
B) maker of a note, payee of a note
C) debtor, maker of a note
D) payee of a note, maker of a note
Question Type: Concept
28) The entity to whom the maker promises future payment is referred to as:
A) maker of a note.
B) creditor.
C) debtor.
D) both A and C.
Question Type: Concept
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29) When counting the days for a note term, which of the following are included?
A) The date the note was issued.
B) Weekdays only (excluding holidays).
C) The maturity date.
D) Normal business days only.
Question Type: Concept
7.7 Calculate the current ratio, quick ratio, accounts receivable turnover, and receivable
collection period
1) Another name for the quick ratio is the acid-test ratio.
Question Type: Concept
2) The formula for the quick ratio is quick assets divided by non-current assets.
Question Type: Concept
3) Accounts Receivable turnover measures the ability to collect cash from a company’s credit
customers.
Question Type: Concept
4) The account receivable turnover is computed by taking the average net Accounts Receivable
and dividing it by the net credit sales.
Question Type: Concept
5) The receivables collection period measures the ability to collect cash from customers who buy
on credit.
Question Type: Concept
6) Quick assets include cash, Accounts Receivable, and prepaid expenses.
Question Type: Concept