13) How are "purchase discounts lost" reported in the financial statements?
A) As a reduction of sales.
B) As an increase in liability.
C) As an increase in inventory.
D) As an expense item.
14) Which statement is correct?
A) Trade payables are supported by a written promise to pay.
B) Trade payables with no stated interest rate do not need to be discounted.
C) Notes payable are legally enforceable and can only be interest bearing.
D) Notes payables are recognized at the face value or transaction price.
15) Which statement is
not
correct about notes payable?
A) Notes payable are supported by a written promise to pay.
B) Non-interest bearing notes are recognized at their fair value.
C) Non-interest bearing notes are recognized at the transaction price.
D) Fair value can be estimated by using discounted cash flow.
16) For the following transaction, provide all of the required journal entries from inception to liquidation. Assume a December 31 year end and that the company does not prepare interim statements. Round all amounts to nearest dollar.
Face value of note payable$200,000
Date of issue for noteMarch 1, 2012
Due date for noteMay 1, 2012
Interest rate in the note0%
Market rate of interest5%
Consideration receivedInventory