Question 1

A three-month note dated April 1 would be due on July 1.

Accepted Answer

This is true. A three-month note has a maturity date three months after the issue date. In this case, April 1 plus three months would be July 1.

Question 2

The time of the note consists of the days or months from the date of issue to the date of the note's maturity.

Accepted Answer

The time of the note is indeed calculated based on the number of days or months from the date of issue to the date of maturity.

Question 3

The total of the notes payable register should agree with the total of the notes receivable account in the general ledger.

Accepted Answer

The notes payable register and notes receivable account represent different financial obligations and assets, respectively, and do not need to match.

Question 4

A promissory note may be interest bearing or non-interest bearing.

Accepted Answer

A promissory note can be either interest-bearing or non-interest bearing, depending on the agreement between the parties involved.

Question 5

When a bank collects a notes receivable, it notifies the payee that the net amount has been added to the payee's account by using a credit advice.

Accepted Answer

This statement is true. A credit advice is a notification that a payment has been made and added to the payee's account.

Question 6

A promissory note is usually referred to as a "note."

Accepted Answer

A promissory note is often abbreviated as "note."

Question 7

If the maker of a note refuses or is unable to pay or renew it at maturity, the note is said to be dishonored.

Accepted Answer

This is a correct statement about dishonored notes.

Question 8

The account that is credited for accrued interest on notes receivable is Interest Receivable.

Accepted Answer

The account that is credited for accrued interest on notes receivable is Interest Revenue, not Interest Receivable. Interest Receivable is debited to record the amount of interest earned but not yet received.

Question 9

Interest = Principal × Rate × Time.

Accepted Answer

This is the formula to calculate simple interest which is correct.

Question 10

When the term of a note is specified in days, time is computed using the exact number of days from the date of the note to the date of its maturity.

Accepted Answer

This is true. When the term of a note is specified in days, the time is calculated using the exact number of days between the date of the note and the date of its maturity. There is no adjustment made for weekends, holidays, or non-business days.

Question 11

A 90-day note dated July 9 would be due on October 9.

Accepted Answer

A 90-day note dated July 9 would be due on October 7, as July has 31 days, August has 31 days, and September has 30 days, totaling 92 days.

Question 12

The proper entry to make when a note is paid at maturity depends on whether it is an interest-bearing or a non-interest-bearing note.

Accepted Answer

This statement is true. When a note is paid at maturity, the proper entry will differ depending on whether it is an interest-bearing or non-interest-bearing note. For example, an interest-bearing note will require a journal entry to record the payment of both principal and interest, while a non-interest-bearing note will only require a journal entry for the payment of the principal amount.

Question 13

If the time of the note is stated in days, the due date is the specified number of days after the issue date.

Accepted Answer

If the time of the note is stated in days, the due date is calculated by adding the specified number of days to the issue date.

Question 14

The principal of the note is the face amount that the maker promises to pay at maturity.

Accepted Answer

The principal of a note is the amount that the maker promises to pay at maturity.

Question 15

When a note receivable matures, the amount must be paid directly to the payee.

Accepted Answer

The answer of When a note receivable matures, the amount...

Question 16

The maker of the note is the one who is to receive the specified amount of money.

Accepted Answer

The maker of the note is the one who promises to pay the specified amount of money, while the payee is the one who is to receive the specified amount of money.

Question 17

A promissory note must be signed by the maker of the note.

Accepted Answer

A promissory note is a legal document that contains a promise from the person who signs it (known as the maker) to pay a certain amount of money to the payee. In order for the promissory note to be valid, it must be signed by the maker.

Question 18

A written promise to pay a specific sum of money at a definite future date is called a promissory note.

Accepted Answer

This is a true statement. A promissory note is a legally binding document that outlines the specifics of a loan agreement, including the amount of money borrowed, the interest rate, and the repayment terms. It is essentially a written promise to repay a specific sum of money at a future date.

Question 19

An auxiliary record of notes receivable that provides detailed information about the notes held by a business is known as a notes receivable register.

Accepted Answer

A notes receivable register is an auxiliary record used to keep detailed information about notes receivable held by a business. It includes information such as the payer's name, payment terms, due dates, and any other relevant information about the note.

Question 20

The maker of the note is the one who promises to pay a certain amount of money at a definite future time.

Accepted Answer

This statement accurately describes the maker of a promissory note, who is typically the borrower or debtor in the transaction.

Quiz 17: Accounting for Notes and Interest