True/False
Indicate whether the statement is true or
false.
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1.
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When unearned revenue is recorded, the amount to be received in the future is
not yet known.
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2.
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If a customer signs a note allowing 90 days for payment and pays no cash up
front, the transaction is recorded in the cash receipts journal.
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3.
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A note that is not paid when due is called an overdue note.
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4.
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The steps used to record a dishonored note receivable are: (1) calculate the
interest income; (2) record the debit for the total amount receivable; (3) record the credit for the
note principal; and (4) record the credit for the interest income.
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5.
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After closing entries have been posted, the balance in Interest Receivable will
be zero.
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6.
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Most companies use a 365 day year to calculate interest on notes receivable,
even in a leap year.
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7.
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Unearned revenue is initially recorded either as a liability or as an
expense.
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8.
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To recognize the amount of unearned revenue earned during the year, an adjusting
entry is recorded.
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9.
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When a business receives cash in advance for rent, the amount is recorded as
either a liability or a revenue.
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10.
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Promissory notes that a business accepts from customers are notes
payable.
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Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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June 3. Regent Co. accepts a 30-day, 10% note from AutoWorld for an extension of
time on its account, $600.00.
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1.
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Refer to the Regent Co. Scenario. The debit for this transaction would be made
to ____.
A. | Accounts Payable | C. | Notes Payable | B. | Accounts Receivable | D. | Notes
Receivable |
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2.
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Refer to the Regent Co. Scenario. Assuming the $600.00 represents the entire
amount owed by AutoWorld, the balance of Accounts Receivable after this transaction has been posted
is ____.
A. | $0 | C. | $60.00 | B. | $5.00 | D. | $600.00 |
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On May 18, Silverton Company dishonored Note Receivable No. 16, a 30-day, 9%
note with a principal of $500.00. On July 2, Silverton pays the full amount due on the note
receivable.
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3.
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Refer to the Silverton Company Scenario. The entry on July 2 would be recorded
in the ____.
A. | cash receipts journal | C. | general journal | B. | cash payments journal | D. | sales journal |
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4.
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If a company initially records rent income received in advance as unearned rent,
a reversing entry ____.
A. | will be needed | B. | will not be needed | C. | may or may not be
needed | D. | is only needed if the account is closed |
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5.
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On December 1, Augustus Property Management Group received $12,000.00 for three
months rent (December through February) from Goya Company. Augustus records the amount as rent
income. The adjusting entry on December 31 to recognize unearned rent would be ____.
A. | a debit to Unearned Rent and a credit to Rent Income for
$4,000.00 | B. | a debit to Rent Income and a credit to Unearned Rent for
$4,000.00 | C. | a debit to Unearned Rent and a credit to Rent Income for
$8,000.00 | D. | a debit to Rent Income and a credit to Unearned Rent for
$8,000.00 |
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6.
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On December 31, Placesettings, Inc. has one note receivable outstanding. It is a
60-day, 12% note for $750.00, dated December 16. The amount of accrued interest recorded in the
adjusting entry is ____.
A. | $3.70 | C. | $7.75 | B. | $3.75 | D. | $15.00 |
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Oct. 15. Weston, Inc. , accepts a 60-day, 11% note from Roma Imports for an
extension of time on its account, $990.00.
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7.
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Refer to the Weston Inc. Scenario. The credit for this transaction would be made
to ____.
A. | Accounts Payable | C. | Notes Payable | B. | Accounts Receivable | D. | Notes
Receivable |
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8.
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Refer to the Weston Inc. Scenario. This transaction would be recorded in the
____.
A. | cash receipts journal | C. | general journal | B. | cash payments journal | D. | sales journal |
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On August 1, Hawthorne Limited dishonored Note Receivable No. 86, a 60-day, 10%
note with a principal of $1,200.00. On September 30, Hawthorne pays the full amount due on the note
receivable.
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9.
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Refer to the Hawthorne Limited Scenario. The total amount due on August 1 was
____.
A. | $1,200.00 | C. | $1,240.00 | B. | $1,220.00 | D. | $1,320.00 |
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10.
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On December 31, one of the adjusting entries debits Interest Receivable and
credits Interest Income for the amount of accrued interest income. On January 1, a reversing entry
____.
A. | will be needed | B. | will not be needed | C. | may or may not be
needed | D. | is only needed if an account is closed |
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11.
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After adjusting and closing entries have been posted, Interest Receivable has an
$8.50 debit balance representing accrued revenue. On January 1, the reversing entry ____.
A. | is not needed | B. | is a debit to Interest Receivable and a credit
to Interest Income for $8.50 | C. | is a debit to Interest Income and a credit to
Interest Receivable for $8.50 | D. | is a debit to Interest Expense and a credit to
Interest Receivable for $8.50 |
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12.
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Rent received in advance is a liability until the rented space is actually
____.
A. | paid for | C. | rented | B. | used | D. | none of the
above |
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13.
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At the end of a fiscal period, a business must show how much rent received in
advance has become ____.
A. | an expense | C. | an asset | B. | a revenue | D. | a liability |
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14.
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The interest on a 3-month, 10%, $2,000.00 note receivable is ____.
A. | $25.00 | C. | $24.66 | B. | $100.00 | D. | $50.00 |
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15.
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Recording an adjusting entry for accrued interest income is an application of
the accounting concept ____.
A. | Objective Evidence | B. | Historical Cost | C. | Consistent
Reporting | D. | Matching Expenses with Revenue |
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