FAR — Financial Accounting & Reporting — Quiz 39

Questions in this quiz (10)

1. Which of the following causes interest revenue to increase over time?

   • Passage of time on an outstanding note
   • Customer payment of accounts receivable
   • Writing off receivables
   • Recording depreciation

2. Which internal control helps ensure notes receivable are properly recorded?

   • Monitoring only
   • Proper documentation of promissory notes
   • Eliminating documentation
   • Allowing unrestricted access

3. Which account increases when interest revenue is recorded?

   • Expense
   • Revenue
   • Liability
   • Asset

4. Which best describes the purpose of notes receivable?

   • To eliminate receivables
   • To provide formal credit agreements with interest
   • To reduce liabilities
   • To record expenses

5. Which of the following best describes maturity value?

   • Principal only
   • Principal plus interest due at maturity
   • Interest amount only
   • Carrying value

6. Which journal entry records conversion of accounts receivable to a note receivable?

   • Debit Notes Receivable; Credit Accounts Receivable
   • Debit Accounts Receivable; Credit Notes Receivable
   • Debit Cash; Credit Accounts Receivable
   • Debit Interest Revenue; Credit Notes Receivable

7. Which financial statement reports interest revenue earned?

   • Balance sheet
   • Income statement
   • Statement of retained earnings
   • Statement of cash flows

8. Which best describes the principal of a note receivable?

   • Total maturity value
   • Original amount loaned
   • Interest earned
   • Payment at maturity

9. Which transaction increases notes receivable?

   • Collecting cash
   • Writing off bad debts
   • Accepting a promissory note
   • Recording interest expense

10. Which account is credited when interest revenue is earned but not received?

    • Interest receivable
    • Interest revenue
    • Notes receivable
    • Accounts receivable