Question : 161.Refer to the information above. Salem’s balance sheet at December : 1237646

 

 

161.Refer to the information above. Salem’s balance sheet at December 31, 2014 includes which of the following as a result of the sale of land on November 1?   

A.Notes Receivable of $900,000 and Interest Receivable of $9,000.

 

B.Notes Receivable of $927,000 and Interest Receivable of $9,000.

 

C.Notes Receivable of $900,000 and Interest Receivable of $27,000.

 

D.Notes Receivable of $900,000 only.

$900,000 × .06 × 2/12 = $9,000

 

 

 

162.Refer to the information above. On May 1, 2015 (maturity date), the note is collected in full by Salem Corporation. Assuming a fiscal year-end of December 31, Salem recognizes which of the following in its income statement for 2015 with regard to this note?   

A.$927,000 sales revenue.

 

B.$27,000 interest revenue.

 

C.$18,000 interest revenue.

 

D.$9,000 interest revenue.

$900,000 × .06 × 4/12 = $18,000

 

 

 

163.Refer to the information above. Assuming the maker of the note defaults on May 1, 2015, Salem will record on this date:   

A.An accounts receivable of $900,000 from the maker of the note.

 

B.An accounts receivable in the amount of $900,000, as well as interest expense of $27,000.

 

C.An accounts receivable in the amount of $927,000, as well as interest revenue of $18,000.

 

D.An accounts receivable in the amount of $900,000, as well as interest revenue of $18,000.

$900,000 + $9,000 + $18,000 = $927,000

 

 

 

On June 1, 2015, Jensen Company acquired an 8%, ten-month note receivable from a customer in settlement of an existing account receivable of $130,000. Interest and principal are due at maturity.

 

164.Refer to the information above. The proper adjusting entry at December 31, 2015, with regard to this note receivable includes a:   

A.Debit to Cash of $6,067.

 

B.Debit to Notes Receivable of $10,400.

 

C.Credit to Interest Revenue of $10,400.

 

D.Debit to Interest Receivable of $6,067.

$130,000 × .08 × 7/12 = $6,067

 

 

 

165.Refer to the information above. Jensen’s entry to record the collection of this note at maturity includes a:   

A.Credit to Interest Receivable of $6,067.

 

B.Credit to Interest Revenue of $6,067.

 

C.Credit to Interest Receivable of $2,600.

 

D.Credit to Notes Receivable of $140,400.

Correct Journal EntryDebit, Cash $138,667Credit, Interest Receivable $6,067Credit, Interest Revenue $2,600Credit, Notes Receivable $130,000

 

 

 

166.If a 15%, two-month note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:   

A.Include a debit to Notes Receivable for $5,750.

 

B.Include a debit to Notes Receivable for $5,062.50.

 

C.Include a credit to Interest Revenue for $62.50.

 

D.Include a debit to Notes Receivable for $5,000 and no entry for interest.

Correct Journal EntryDebit, Notes Receivable $5,000Credit, Accounts Receivable $5,000

 

 

 

167.Gold Company received a two-month, 12% note for $8,000 on June 16. Which of the following statements is true?   

A.Gold will receive $8,000 plus interest of $960 at maturity.

 

B.Gold should record a total receivable due of $8,080 on June 16.

 

C.The principal of the note plus interest is due on August 15.

 

D.The maturity value of this note is $8,000.

$8,000 × 2/12 × .12 = $160 interest due; maturity value = $8,160

 

 

 

168.On November 1, Willis Corporation sold merchandise in return for a 6%, three-month note receivable in the amount of $60,000. The proper adjusting entry at December 31 (end of Willis’s fiscal year) includes a:   

A.Credit to Interest Revenue of $600.

 

B.Debit to Cash of $600.

 

C.Debit to Interest Receivable of $300.

 

D.Credit to Notes Receivable of $900.

Correct Journal EntryDebit, Interest Receivable $600Credit, Interest Revenue $600($60,000 × .06 × 2/12)

 

 

 

169.If a 5%, four-month note receivable is acquired from a customer in settlement of an existing account receivable of $50,000, the accounting entry for acquisition of the note will:   

A.Include a debit to Notes Receivable for $50,822.

 

B.Include a debit to Notes Receivable for $50,208.

 

C.Include a credit to Interest Revenue for $822.

 

D.Include a debit to Notes Receivable for $50,000 and no entry for interest.

Correct Journal EntryDebit, Notes Receivable $50,000Credit, Accounts Receivable $50,000

 

 

 

170.Silver Company received a two-month, 6% note for $16,000 on August 5. Which of the following statements is true?   

A.Silver will receive $16,000 plus interest of $960 at maturity.

 

B.Silver should record a total receivable due of $16,080 on August 5.

 

C.The principal of the note plus interest is due on October 15.

 

D.The maturity value of this note is $16,160.

$16,000 × 2/12 × .06 = $160 interest due; maturity value = $16,160