Steve's Carpet Service borrows $250,000 from First National Bank

1.On October 1, Steve’s Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. The entry by Steve’s Carpet Service to record payment of the note and accrued interest on January 1 is (Points : 2) Notes Payable…………..255,000
Cash…………………………….255,000

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Notes Payable…………..250,000
Interest Payable…………..5,000
Cash……………………………….255,000

Notes Payable…………..250,000
Interest Payable………….20,000
Cash……………………………….270,000

Notes Payable…………..250,000
Interest Expense…………..5,000
Cash……………………………….255,000

Question 2. 2.A current liability is a debt that can reasonably be expected to be paid (Points : 2)

within one year or the operating cycle, whichever is longer.
between 6 months and 18 months.
out of currently recognized revenues.
out of cash currently on hand.

Question 3. 3.Unearned Rent Revenue is (Points : 2)

a contra account to Rent Revenue.
a revenue account.
reported as a current liability.
debited when rent is received in advance.

Question 4. 4.When an interest-bearing note matures, the balance in the Notes Payable account is (Points : 2)

less than the total amount repaid by the borrower.
the difference between the maturity value of the note and the face value of the note.
equal to the total amount repaid by the borrower.
greater than the total amount repaid by the borrower.

Question 5. 5.As interest is recorded on an interest-bearing note, the Interest Expense account is (Points : 2)

increased; the Notes Payable account is increased.
increased; the Notes Payable account is decreased.
increased; the Interest Payable account is increased.
decreased; the Interest Payable account is increased.

Question 6. 6.The interest charged on a $100,000 note payable, at the rate of 6%, on a 60-day note would be (Points : 2)

$6,000.
$3,333.
$1,500.
$1,000.

Question 7. 7.On October 1, Steve’s Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. What entry must Steve’s Carpet Service make on December 31 before financial statements are prepared? (Points : 2)

Interest Payable…………..5,000
Interest Expense……………….5,000

Interest Expense…………..20,000
Interest Payable……………….20,000

Interest Expense…………..5,000
Interest Payable……………….5,000

Interest Expense…………..5,000
Notes Payable…………………..5,000

Question 8. 8.The interest charged on a $50,000 note payable, at the rate of 6%, on a 2-month note would be (Points : 2)

$3,000.
$1,500.
$750.
$500.

Question 9. 9.The entry to record the issuance of an interest-bearing note credits Notes Payable for the note’s (Points : 2)

maturity value.
market value.
face value.
cash realizable value.

Question 10. 10.Crawford Company has total proceeds (before segregation of sales taxes) from sales of $4,770. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is: (Points : 2)

$4,770.
$4,484.
$5,056.
$4,500.

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