Question 1

If the maker of the note fails to pay on the maturity date,the note is said to be dishonored.

Accepted Answer

If the maker of the note fails to pay on the maturity date, the note is not honored, and it is considered dishonored.

Question 2

On December 1,2019,Pinewood Company 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.

Accepted Answer

The answer of On December 1,2019,Pinewood Company sold machinery to...

Question 3

On January 1,Southwest Company accepted a one-year note for $60,000 at 8% from one of its customers.When the note matured on December 31,the customer was unable to pay,and the company recorded the dishonor.The amount of the debit recorded on December 31 is ________.

Accepted Answer

$60,000 × 8% = $4800
Total amount = $60,000 + $4800 = $64,800.

Question 4

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.

Accepted Answer

The answer of On July 1,2019,Landscape Equipment Sellers accepted a...

Question 5

If the maker of the note does not pay at maturity,the note has expired and is no longer in force.

Accepted Answer

If the maker of the note does not pay at maturity, the note is considered expired and is no longer a valid document.

Question 6

When a notes receivable is outstanding at the end of an accounting period,________.

Accepted Answer

The interest revenue earned on the note up to year-end is part of that year's earnings according to the revenue recognition principle. An adjusting entry is needed to record the interest revenue earned during the accounting period. Therefore, choices A and C are incorrect. Choice B is also incorrect as earnings from the note should be recorded based on the revenue recognition principle and not when the cash is received.

Question 7

On October 1,2019,Fashion Jewelers accepted a 4-month,12% note for $7500 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.)

Accepted Answer

($7500 × 12%) × 3/12 = $225

Question 8

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.

Accepted Answer

The answer of On November 1,2018,Downtown Jewelers accepted a 3-month,15%...

Question 9

On October 1,2019,Springfield Company made a loan to one of its customers.The customer signed a 6-month note for $130,000 at 12%.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.)

Accepted Answer

($130,000 × 12%) × 3/12 = $3900

Question 10

On October 1,2018,Equipment Suppliers Company made a loan to one of its customers.The customer signed a 4-month note for $110,000 at 13%.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.)

Accepted Answer

($110,000 × 13%) × 3/12 = $3575

Question 11

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.

Accepted Answer

The answer of On October 1,2019,Island Jewelry Company accepted a...

Question 12

A six-month note receivable for $5000 at 11%,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.)

Accepted Answer

($5000 × 11%) × 3/12 = $138

Question 13

If a credit customer fails to pay an accounts receivable,the company may ask the customer to sign a promissory note.

Accepted Answer

A promissory note is a written promise to pay a debt, so if a credit customer fails to pay an accounts receivable, the company may use a promissory note as a way to secure payment from the customer.

Question 14

The following selected transactions occurred during 2019 for Northwest Movers.The company ends it accounting year on December 31.
 $\begin{array}{|l|l|}
\hline \text { Apr. } 1 & \text { Performed services on account for Ellison Rentals, } \$ 12,000 . \
\hline & \text { Received a } \$ 12,000,3 \text { month, } 9 \% \text { note from Ellison in } \
\text { Aug. } 1 & \text { Fatisfaction of its past-due account receivable. } \
\hline \text { Nov. } 1 & \text { Collected the Ellison note at maturity }\
\hline 
\end{array}$ Prepare the journal entries to record these transactions.Omit explanations.

Accepted Answer

The answer of The following selected transactions occurred during 2019...

Question 15

Which of the following would be included in the entry by the payee to record a dishonored note receivable?

Accepted Answer

When a note receivable is dishonored, the payee must reverse the note receivable and recognize that the amount will not be collected as originally agreed. This involves debiting Accounts Receivable to reflect the expectation of eventually collecting the amount through a different means, such as regular collection processes.

Question 16

On October 1,2019,Westfield Company sold machinery to a customer for $21,000.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.

Accepted Answer

($21,000 × 12%) × 3/12 = $630

Question 17

When a company accepts a promissory note from a customer who cannot pay an accounts receivable,the company will credit Notes Receivable.

Accepted Answer

When a company accepts a promissory note from a customer who cannot pay an accounts receivable, the company will credit Accounts Receivable.

Question 18

On December 1,2018,Atlas Company 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 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.)

Accepted Answer

($24,000 × 9%) × 9/12 = $1620

Question 19

Companies should not sell merchandise in exchange for notes receivable.

Accepted Answer

Some companies sell merchandise in exchange for notes receivable.

Question 20

Which of the following is the result of the maker of a promissory note failing to pay the note on the due date?

Accepted Answer

A dishonored note is a promissory note that is not paid on the due date. It is also referred to as a defaulted note.

Quiz 9: Receivables