US Accounting_Chapter 6

The adjusting entry for accrued interest income at the end of the accounting period is a credit to interest receivable and a debit to interest revenue.

• False

• True

A three-year $200,000 note receivable with simple interest of 5% is paid off one year early for $220,000. What is the proper entry to Notes Receivable to record the payment?

• Credit notes receivable $220,000

• Debit notes receivable $200,000

• No entry

• Credit notes receivable $200,000

Which of the following statements, regarding notes receivable, is incorrect?

• All notes receivable are considered long-term assets.

• A notes receivable is a written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future.

• Notes receivable usually have longer terms than accounts receivable.

• Notes receivable are sometimes called promissory notes.

Which of the following items would be adjusted in a bank reconciliation?

• Deposits in transit

• Petty cash balances

• Accrued liabilities

• Inventory on hand

On July 1, 202N, your company borrowed $20,000 on a four-year, 6% note payable. On December 31, 202N, a journal entry should be made to record

• Interest payable of $600

• Cash payment of $1,200

• Interest payable of $1,200

• A note payable of $20,000

What is the primary purpose of internal controls related to cash?

• To maximize interest income on cash balances

• To simplify accounting procedures

• To prevent fraud and misuse of cash

• To ensure cash is accurately reported

Which account is debited when replenishing a petty cash fund?

• Cash

• Accounts Receivable

• Expense accounts

• Petty Cash

Determine the amount of interest due at the end of the year on a 30-day note for $100,000 at 2% Annual Percentage Rate (APR) executed on December 15 (use 365-day year).

• $87.67

• $146.38

• $0.00

• $2,000

What is the main purpose of a bank reconciliation?

• To compare the company’s cash balance with the bank’s cash balance

• To ensure all petty cash transactions are recorded

• To reconcile the general ledger with the income statement

• To record all outstanding checks

What is a key feature of petty cash transactions?

• They require approval by the board of directors

• They are recorded in the general ledger monthly

• They involve small, routine expenditures

• They are reconciled annually