Reference no: EM132600770
Questions -
Q1. A $5,600, 8% note dated May 20 for 78 days was discounted on June 23 at 14%. The amount of the discount (using a 360-day year) is: (Do not round any intermediate calculations. Round your final answer to the nearest cent.)
A. $98.73.
B. $171.53.
C. $100.01.
D. $97.47.
Q2. What is the adjusting entry to record interest for Pristine Company (the holder of the note) as of December 31 if they receive a $27,000, 90-day, 6% note on December 10th from Elegant Company (debtor)? (Use a 365-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)
A. debit to Interest Expense of $405, credit to Interest Payable of $405.
B. debit to Interest Income of $95, credit to Interest Receivable of $95.
C. debit to Interest Payable of $405, credit to Interest Expense of $405.
D. debit to Interest Receivable of $95, credit to Interest Income of $95.
Q3. Paying the principal on a note plus interest would:
A. Increase total liabilities.
B. Decrease total assets.
C. Increase owner's equity.
D. B and C could be correct.
Q4. Johnson issues a $3,000, 6%, 100-day promissory note to Adam on November 1. What is the adjusting entry made by Johnson on December 31 to recognize the interest (using a 360-day year)? (Do not round any intermediate calculations. Round your final answer to the nearest cent.)
A. Debit Interest Expense; credit Interest Payable for $15.00
B. Debit Interest Receivable; credit Interest Income for $30.00
C. Debit Interest Receivable; credit Interest Income for $15.00
D. Debit Interest Expense; credit Interest Payable
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