7.4 Account for notes receivable
1) A promissory note is a verbal promise to pay a specified amount of money on a particular future date.
2) The business or person that signs the note and promises to pay the required amount is called the payee.
3) The amount loaned out by the payee is called the maturity value.
4) The maturity value is the sum of the principal plus the interest due at maturity.
5) When counting the days of a note, remember to count the day the note was issued.
6) Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent):
A) $2,943.00.
B) $2,821.50.
C) $2,819.84.
D) $119.84.
E) $2,891.84
7) A 135-day note issued on May 17 will mature on:
A) September 28.
B) September 29.
C) September 30.
D) October 1.
E) October 2.
8) On March 1, 2012, Kelly Company lent $3,500 to Tim on a 1-year 6% promissory note. The amount of interest to be accrued on December 31 will be:
A) $210.00.
B) $175.00.
C) $157.50.
D) $140.00.
E) $176.00
9) Isaiah Company converted a $4,000 account receivable from Mark to a 75-day, 8% note receivable. The maturity value (assume a 360-day year) that will be due from Mark in 75 days (round to nearest dollar) is:
A) $4,000.
B) $4,067.
C) $4,320.
D) $4,077.
E) some other number.
10) Andy Corporation lent $25,000 to Casey Corporation for 75 days at 7% interest on November 22, 2010. How much interest will have accrued to Andy Corporation on December 31, 2010, assuming a 360-day year?