Question 1

The maturity value of a $40,000 note at 11% for 5 months is (round to nearest dollar):

Accepted Answer

The formula to calculate maturity value is:

Maturity value = principal + (principal x rate x time)

Here, 
Principal = $40,000 
Rate = 11% = 0.11 (in decimal)
Time = 5 months

Plugging in the values, we get:

Maturity value = $40,000 + ($40,000 x 0.11 x (5/12)) 
Maturity value = $40,000 + $1,833.33 
Maturity value = $41,833.33

Rounding to the nearest dollar, we get the answer as $41,833. Therefore, the best choice is A.

Question 2

Because it includes only cash and short-term investments in the numerator, the current ratio is a more stringent measure of a firm's ability to pay current liabilities than the quick ratio.

Accepted Answer

The statement is incorrect. The quick ratio is a more stringent measure of a firm's ability to pay current liabilities because it includes only cash, short-term investments, and accounts receivable in the numerator, while the current ratio includes all current assets.

Question 3

If Extol's Inc. sells items to a customer who uses a credit card for $800, and there is a credit card fee of 2%, what is the amount of the debit to Cash?

Accepted Answer

The answer of If Extol's Inc. sells items to a...

Question 4

The interest on a note is $800, the interest rate is 6% and the note is for 60 days. What is the principal of the note? (Use a 360 day year)

Accepted Answer

We can use the formula:

Interest = Principal x Rate x Time

where Rate is the annual interest rate and Time is the time in years. Since the note is for 60 days, we need to express this in years by dividing by 360:

60 days ÷ 360 days/year = 1/6 year

Then, we can solve for the principal:

$800 = P x 0.06 x 1/6

$800 = P/100 x 6/100 x 1/6

$800 = P/10000

P = $80,000

Therefore, the principal of the note is $80,000. Answer C is correct.

Question 5

The interest on a $100,000 note at 9% for 120 days is: (Use a 365 day year and round to the nearest dollar.)

Accepted Answer

The interest is calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $100,000, Rate = 9% or 0.09, and Time = 120/365. So, Interest = $100,000 x 0.09 x (120/365) = $2,959.18, which rounds to $2,959.

Question 6

On the maturity date, the payee of a note will debit Cash and credit:

Accepted Answer

On the maturity date, the payee receives cash, so they debit Cash. They also credit Note Receivable to remove the note from their books and credit Interest Revenue for the interest earned.

Question 7

On December 31, 2011, the payee on a $4,500, 120-day, 10% note dated November 1, 2011, will recognize: (Use a 365 day year and round to the nearest dollar.)

Accepted Answer

The answer of On December 31, 2011, the payee on...

Question 8

The entry to record accrued interest on a note receivable at year end includes a debit to:

Accepted Answer

Accrued interest on a note receivable increases the amount owed to the business and is recorded as Interest Receivable.

Question 9

The due date of a 120 day, 10% note for $30,000, dated April 12 is:

Accepted Answer

To find the due date, we need to add 120 days to the date of April 12.

April has 30 days, so May 12 is the 30th day after April 12.

June has 30 days, so June 12 is the 60th day after April 12.

July has 31 days, so July 12 is the 90th day after April 12.

August has 10 days, so August 10 is the 120th day after April 12.

Therefore, the due date of the note is August 10.

Question 10

Ratios can help investors and creditors evaluate the financial health of a company.

Accepted Answer

Ratios are important financial tools that help investors and creditors determine the financial strengths and weaknesses of a company. By analyzing a company's liquidity, profitability, solvency, and efficiency ratios, investors and creditors can make informed decisions about whether to invest in or lend money to the company.

Question 11

In order to effectively evaluate the days' sales in receivables, it should be compared to the company's credit terms.

Accepted Answer

Evaluating days' sales in receivables is done to monitor how quickly a company collects payment from its customers. Comparing it to the company's credit terms provides insight into whether the company is efficiently managing its accounts receivable and collecting payment within a reasonable timeframe.

Question 12

If the interest on a note is 12.5% and the principal was $100,000, what is the maturity value of the note, if the note is outstanding for 7 months?
(Round to the nearest dollar.)

Accepted Answer

To find the maturity value of the note, we first need to calculate the interest for 7 months.
$100,000 x 0.125 = $12,500
The interest for 7 months is ($12,500 / 12) x 7 = $7,292.
The maturity value of the note is the principal plus the interest, which is $100,000 + $7,292 = $107,292. Rounded to the nearest dollar, the answer is $107,292. Thus, the correct answer is C.

Question 13

Selling accounts receivable typically:

Accepted Answer

The answer of Selling accounts receivable typically:
...

Question 14

Another term for the acid-test ratio is the current ratio.

Accepted Answer

The acid-test ratio, also known as the quick ratio, is different from the current ratio, which measures a company's ability to pay its short-term obligations using all current assets. The acid-test ratio only includes assets that can be quickly converted to cash, such as cash, marketable securities, and accounts receivable.

Question 15

If Extol's Inc. sells items to a customer who uses a credit for $800, and there is a credit card fee of 2%, what is the amount of the credit to Sales Revenue?

Accepted Answer

The credit to Sales Revenue is the full amount of the sale, which is $800. The credit card fee affects the cash received, not the sales revenue recorded.

Question 16

VISA charges a fee for using credit cards. If Brunda's is charged $40 on a sale of $1,600, what percentage is the fee?

Accepted Answer

The answer of VISA charges a fee for using credit...

Question 17

How does accepting payments by a bank-issued credit card affect the recognition of an individual sales transaction?

Accepted Answer

The answer of How does accepting payments by a bank-issued...

Question 18

An acceptable acid-test ratio varies by industry, but there is no such thing as an acid-test ratio that is too high.

Accepted Answer

While it is true that an acceptable acid-test ratio varies by industry, having a ratio that is too high can actually indicate that a company is not using its resources efficiently. A very high acid-test ratio may suggest that a company is hoarding cash rather than investing in growth opportunities or paying off debts. Therefore, there is such a thing as an acid-test ratio that is too high.

Question 19

Chauky's Catering accepted a bank-issued credit card in payment of a $4,000 sales transaction. Chauky's bank charges 3% to process the transaction. The journal entry to record the sales transaction will include:

Accepted Answer

The answer of Chauky's Catering accepted a bank-issued credit card...

Question 20

In general, companies prefer a shorter collection period for receivables.

Accepted Answer

This statement is true. A shorter collection period means that the company is receiving payment from its customers at a faster rate, which improves cash flow and reduces the risk of bad debt. Longer collection periods can lead to cash flow problems and increase the costs associated with debt collection.

Quiz 5: Short-Term Investments Receivables

The maturity value of a $40,000 note at 11% for 5 months is (round to nearest dollar) :