Accounting Chapter 26 - Notes Payable and Receivable
False
A business may not issue a note payable to borrow money from a bank
Discount on Notes Payable
A contra liability account representing future interest charges that have already been paid is the ___________ account.
True
A person or business may issue a promissory note to obtain a loan from a bank.
Note Receivable
A promissory note that a business accepts from a customer who need additional time to pay a debt is called a(n) ______
False
Borrowing periods of less than 1 year cannot be used in calculating interest.
True
Both term and issue dates are needed to determine a note's maturity date.
False
Discount on Note Payable is a liability account.
True
Interest = Principal x Interest Rate x Time is the equation for calculating interest on a promissory note.
True
Interest expense for a non-interest bearing note is recorded on the maturity date.
True
Interest income is an example of other revenue and is reported separately on the income statement.
True
Interest rates are usually stated on an annual basis.
Debit Cash & Discount on Notes Payable, credit Notes Pay
Issued a non-interest bearing note to the bank for cash
Debit Cash, credit Notes Payable
Issued an interest-bearing note payable to the bank for cash
False
The Interest Expense account is increased by a credit.
Principal
The ____ is the date on which the note must be paid. - maturity date, The amount being borrowed is the __________ of the note.
Interest Rate
The _______ is the % of the principal that is charged for the use of the money.
Maturity Value
The __________ of a note is the principal plus the interest.
True
The maturity value of a non-interest-bearing note payable is the same as its face value.
False
When a non-interest-bearing note payable is paid, the interest charge is transferred from the Notes Payable account to the Interest Expense account.
True
When a note is signed, the maker is agreeing to repay the note within a certain period of time.
Debit Notes Payable & Interest Exp, credit cash
Wrote a check to the bank in payment of the interest-bearing note
Debit Notes Payable & Interest Exp, credit Cash & Discount on Notes Pay
Wrote a check to the bank in payment of the non-interest-bearing note
False
A non-interest-bearing not payable is the same as an interest-free note.
True
A note receivable is an asset to the business receiving the note.
interest-bearing note payable
A note that requires the face value plus interest to be paid on the maturity date is called a(n)__________
Note Payable
A(n) ______ is a promissory note issued to a creditor or by a business to borrow money from a bank.
promissory note
A(n) ____________ is a written promise to pay a business or a person a certain amount of money at a specific time
True
Notes Payable is credited when a company issues a promise to repay a debt.
False
Notes Receivable is classified as a contra asset account.
True
On interest bearing notes, the face value and the principal are the same.
Debit Cash, credit Notes Receivable & Interest Income
Received a check for the payment of the interest-bearing note from the customer.
Debit Notes Receivable, credit A/R
Received an interest bearing note from a customer for payment on account
Term
The _________ is the amount of time that the borrower has to repay a promissory note.
Maker
The ______________ of the note is the person or business promising to repay the principal and interest.
True
The account Discount on Notes Payable has a normal debit balance.
Principal/Face Value
The amount being borrowed when a promissory note is issued or received is called the _____________.
Proceeds
The amount of cash actually received by the borrower of a non-interest-bearing note payable is called the _________.
Interest Rate
The amount of interest to be charged stated as a percentage of the principal is called the ________.
Issue Date
The date on which a note is written is called its
False
The due date for a 30-day note dated April 10 is May 9
Bank Discount
The interest deducted in advance from a non-interest-bearing note payable is called the _________
False
The interest on a 12.5%, $3,500 promissory note for 2 years is $437.50.