Question : 117. J. Lennon borrows a sum of money from Y. Ono. : 1229756

117. J. Lennon borrows a sum of money from Y. Ono. A promissory note is used to document the terms of the transaction. In this situation: 
A. J. Lennon is considered the maker of the note.
B. J. Lennon is considered the payee of the note.
C. J. Lennon records the note as an asset in his accounting records.
D. The maker of the note could be either Y. Ono or J. Lennon depending on which party actually draws up the document.

118. Anthony loaned $2,000 to Cleopatra for one year at 10% interest, all due at maturity. He insisted the terms of the transaction be formalized in a promissory note. In this situation: 
A. The maturity value of the note is $2,000.
B. Anthony is considered the maker of the note and records the note as an asset in his accounting records.
C. Anthony is considered the maker of the note and records the note as a liability in his accounting records.
D. Cleopatra is considered the maker of the note and records the note as a liability in her [his] accounting records.

119. In regard to the accounts receivable turnover rate: 
A. The higher the better.
B. The lower the better.
C. In some industries it is better higher and in some industries it is better to be lower.
D. The auto industry prefers a lower rate.

120. When a promissory note is issued, you would expect to find: 
A. Notes payable and interest expense in the financial statements of the maker of the note throughout the life of the note.
B. Notes receivable and interest revenue in the financial statements of the maker of the note throughout the life of the note.
C. Notes receivable in the financial statements of the maker of the note throughout the life of the note, but interest revenue only when interest payments are received.
D. Notes payable in the financial statements of the payee of the note throughout the life of the note, but interest expense only when interest payments are made.

121. When the maker of a note defaults: 
A. An account receivable is recorded for the principal amount of the note only.
B. An account receivable is recorded in the amount of the principal plus interest through the maturity date.
C. Any interest earned for the current period is not recorded, since the maker has defaulted.
D. Any interest earned in a previous period that has already been recorded as interest receivable is written off as a loss due to the maker’s default.

122. As of December 31, 2009, Valley Company has $16,920 cash in its checking account, as well as several other items listed below:
  
What amount should be shown in Valley’s December 31, 2009, balance sheet as “Cash and cash equivalents”? 
A. $53,200.
B. $70,120.
C. $130,120.
D. $113,200.

On November 1, 2010, Salem Corporation sold land priced at $900,000 in exchange for a 6%, six-month note receivable.

123. The journal entry made by Salem to record this transaction on November 1, 2010, includes: 
A. A debit to Notes Receivable of $927,000.
B. A debit to Interest Receivable of $27,000.
C. A credit to Interest Revenue of $27,000.
D. A debit to Notes Receivable of $900,000.

124. Salem’s balance sheet at December 31, 2010 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.

125. On May 1, 2011 (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 2011 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.

126. Assuming the maker of the note defaults on May 1, 2011, Salem will record on this date: 
A. An account receivable of $900,000 from the maker of the note.
B. An account receivable in the amount of $900,000, as well as interest expense of $27,000.
C. An account receivable in the amount of $927,000, as well as interest revenue of $18,000.
D. An account receivable in the amount of $900,000, as well as interest revenue of $18,000.