18) Interest rates are stated on an annual basis, therefore the time in the interest formula is always stated
as one year.
19) On July 7, University Bank lent $560,000 to Jazz Music Shop on a 60 day, 7% note. What is the
maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.)
A) $560,000
B) $599,200
C) $566,444
D) $566,533
20) On August 14, Park Avenue Bank lent $240,000 to City Coffee Shop on a 75 day, 2% note. What is the
maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.)
A) $240,986
B) $241,000
C) $240,000
D) $244,800
21) What is the maturity value of a 6-month, 11% note for $60,000? (Round any intermediate calculations
to two decimal places, and your final answer to the nearest dollar.)
A) $62,000
B) $66,600
C) $63,300
D) $60,000
22) Calculate the interest on a 90-day, 9% note for $50,000. (Use a 360-day year to compute interest.
Round your answer to the nearest dollar.)
A) $2,250
B) $1,125
C) $4,500
D) $375
23) The maturity value of a note is the ________.
A) principal amount minus interest due at maturity
B) principal amount plus interest due at maturity
C) face amount of the note
D) principal amount times the interest rate
24) On April 1, 2019, Barnes Services received a 9-month note for $12,000 at 12%. Calculate the amount of
interest due at maturity. (Round any intermediate calculations to two decimal places, and your final
answer to the nearest dollar.)
A) $972
B) $1,188
C) $1,440
D) $1,080
25) On October 1, 2020, Jewelry Specialists, Inc. made a loan to one of its customers. The customer signed
a 6-month note for $120,000 at 15%. Calculate the total interest earned on the note. (Round any
intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $9,000
B) $4,500
C) $1,500
D) $18,000
26) On October 1, 2018, Parker, Inc. made a loan to one of its customers. The customer signed a 9-month
note for $110,000 at 14%. Calculate the maturity value of the note. (Round any intermediate calculations
to two decimal places, and your final answer to the nearest dollar.)
A) $121,550
B) $125,400
C) $94,600
D) $98,450
27) On December 1, 2020, Eagle, Inc. sold machinery to a customer for $23,000. The customer could not
pay at the time of sale but agreed to pay 3 months later and signed a 3-month note at 11% interest. How
much interest revenue was earned for the entire term of the note? (Round any intermediate calculations
to two decimal places, and your final answer to the nearest dollar.)
A) $633
B) $422
C) $211
D) $2,530
28) On December 1, 2018, Restaurant Equipment, Inc. sold machinery to a customer for $23,000. The
customer could not pay at the time of sale but agreed to pay 9 months later and signed a 9-month note at
11% interest. What was the total amount of cash collected by Restaurant Equipment on the maturity of
the note? (Round any intermediate calculations to two decimal places, and your final answer to the
nearest dollar.)
A) $25,530
B) $24,898
C) $21,103
D) $1,898
29) On October 1, 2018, Mandy‘s Electronics sold merchandise in exchange for a 4-month, $20,000 note
receivable, with 9% interest. Interest revenue of $600 is earned in 2018.
30) If a note receivable is outstanding at the end of an accounting period, the interest earned up to year–
end is recorded as interest revenue when the cash is received.
31) Because of the revenue recognition principle, interest on a note receivable is recorded in the year in
which it is earned.
32) If a credit customer fails to pay an accounts receivable, the company may ask the customer to sign a
promissory note.
33) Companies should not sell merchandise in exchange for notes receivable.
34) When a company accepts a promissory note from a customer who cannot pay an accounts receivable,
the company will credit Notes Receivable.
35) On October 1, 2019, Fashion Jewelers accepted a 5-month, 11% note for $7,500 in settlement of an
overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest
on the note at December 31, 2019. (Round any intermediate calculations to two decimal places, and your
final answer to the nearest dollar.)
A) $206
B) $344
C) $825
D) $413
36) On October 1, 2018, Equipment Suppliers, Inc. made a loan to one of its customers. The customer
signed a 4-month note for $110,000 at 12%. How much interest revenue did the company record in the
year 2018? (Round any intermediate calculations to two decimal places, and your final answer to the
nearest dollar.)
A) $1,320
B) $1,100
C) $4,400
D) $3,300
37) On October 1, 2019, Springfield, Inc. made a loan to one of its customers. The customer signed a 6-
month note for $140,000 at 15%. How much interest revenue did the company record in 2020 for this
note? (Round any intermediate calculations to two decimal places, and your final answer to the nearest
dollar.)
A) $7,000
B) $3,500
C) $5,250
D) $10,500
38) On October 1, 2019, Westfield, Inc. sold machinery to a customer for $25,000. The customer could not
pay at the time of sale, but agreed to pay 12 months later, and signed a 12-month note at 9% interest. How
much interest revenue was earned during 2019? Round any intermediate calculations to two decimal
places, and your final answer to the nearest dollar.
A) $593
B) $563
C) $5,067
D) $2,250
39) On December 1, 2018, Atlas, Inc. sold machinery to a customer for $24,000. The customer could not
pay at the time of sale but agreed to pay 10 months later and signed a 10–month note at 12% interest. How
much interest revenue was earned during 2019? (Round any intermediate calculations to two decimal
places, and your final answer to the nearest dollar.)
A) $1,440
B) $2,880
C) $2,640
D) $2,160
40) A six-month note receivable for $8,000 at 13%, dated October 1, 2020, has accrued interest revenue of
________ as of December 31, 2020. (Round any intermediate calculations to two decimal places, and your
final answer to the nearest dollar.)
A) $1,040
B) $520
C) $260
D) $130
41) When a notes receivable is outstanding at the end of an accounting period, ________.
A) no adjusting entry is needed
B) the revenue recognition principle requires that earnings from the note be recorded in the year the cash
is received
C) the total interest on the note should be recorded in an adjusting entry
D) the interest revenue earned on the note up to year-end is part of that year‘s earnings
42) On November 1, 2018, Downtown Jewelers accepted a 3-month, 15% note for $6,000 in settlement of
an overdue account receivable. The accounting period ends on December 31. Prepare the journal entry to
record the accrued interest at the year end. Omit explanation.
43) On October 1, 2019, Island Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of
an overdue account receivable. Interest revenue was accrued through December 31, 2019. Island receives
the maturity value of the note at maturity. Prepare the journal entry to record the collection. Omit
explanation.
44) On December 1, 2019, Pinewood, Inc. sold machinery to a customer for $2,000. Pinewood regularly
sells machinery. The customer could not pay at the time of sale but agreed to pay 9 months later and
signed a 9-month note at 12% interest. Prepare the journal entry to record the revenue at the time of sale.
Ignore the entry for cost of goods sold. Omit explanation.
45) On July 1, 2019, Landscape Equipment Sellers accepted a 3-month, 15% note for $6,000 in settlement
of an overdue account receivable. Prepare the journal entry to record the acceptance of the note. Omit
explanation.
46) The following selected transactions occurred during 2019 for Northwest Movers. The company ends
it accounting year on December 31.
Apr. 1
Performed services on account for Ellison Rentals, $12,000.
Aug. 1
Received a $12,000, 3 month, 9% note from Ellison in
satisfaction of its past-due account receivable.
Nov. 1
Collected the Ellison note at maturity
Prepare the journal entries to record these transactions. Omit explanations.
Service Revenue
Aug 1
Notes Receivable – Ellison
Nov 1
Cash
Notes Receivable – Ellison
Interest Revenue*