Accounting Ch 7 P 3 Smartbook

On August 21, Alix Company receives a $2,000, 60-day, 6% note from a customer as payment on her account. How much interest will be due on October 20, the due date?

$20

To compute interest due on a maturity date, you should multiply which of the following factors?

- Interest rate - Principal - Time expressed in fraction of year

On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a:

- debit to Notes Receivable for $6,000. - credit to Accounts Receivable for $6,000.

Principal

Amount that the signer agrees to pay back, not including interest

Maturity date

Day that the principal and interest must be paid

Maker

One who signed the note and promised to pay at maturity

On June 30, Nance Company receives a $5,000, 90-day, 4% note from a customer as payment on her account. How much interest will be due on the note's maturity date?

$50

A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is:

April 16

The (maker/payee) __________ of the note is the one that signed the note and promised to pay at maturity. The (maker/payee) __________ of the note is the person to whom the note is payable.

Blank 1: maker Blank 2: payee

To compute interest due on a maturity date, multiply __________ (principal/note) times __________ (interest/dividends) times time expressed in fraction of year.

Blank 1: principal or principle Blank 2: interest rate or interest

Interest

Choice, Charge from using money loaned from one entity to another Charge from using money loaned from one entity to another

A 90-day note is signed on October 21. The due date of the note is:

January 19

DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to:

Notes Receivable in the amount of $5,000

Payee

The person to whom the note is payable

Promissory note

Written promise to pay a specified amount of money

To compute interest due on a maturity date, use the formula:

principal x interest rate x time expressed in fraction of year