51. A maker who dishonors a note is one who does not pay it upon maturity.
52. A dishonored note receivable is usually reclassified as an account receivable.
53. The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not matured in the Notes Receivable account.
54. The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.
Multiple Choice Questions
55. A credit sale of $2,500 to a customer would result in:
A. A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger.
B. A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger.
C. A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger.
D. A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger.
E. A credit to Sales and a credit to the customer's account in the accounts receivable ledger.
56. Acme Company has an agreement with a major credit card company thatcalls for cash to be received immediately upon deposit of Acme customers' credit card sales receipts. The credit card company receives 3.5% of card sales as its fee. If Acme has $2,000 in credit card sales, which of the following statements are true?
A. Acme debits Cash $2,000.
B. Acme debits Cash $1,930.
C. Acme debits Accounts Receivable - Credit Card Co $2,000.
D. Acme debits Accounts Receivable - Credit Card Co $1,930.
E. Acme credits Sales $1,930.
57. Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?
A. Ace will receive $56,154 cash from Seller Company.
B. Seller Company will receive cash $56,154 from Ace.
C. Ace will receive $57,300 cash from Seller Company.
D. Seller Company will receive $57,300 cash from Ace.
E. Ace will pay Seller Company a $1,146 credit card fee.
58. A promissory note received from a customer in exchange for an account receivable:
A. Is a cash equivalent for the recipient.
B. Is an account receivable for the recipient.
C. Is a note receivable for the recipient.
D. Is a short-term investment for the recipient.
E. Is a note payable for the recipient.
59. The person who signs a note receivable and promises to pay the principal and interest is the:
A. Maker
B. Payee
C. Holder
D. Receiver
E. Owner
60. The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:
A. Relevance
B. Full disclosure
C. Evaluation
D. Materiality
E. Matching