33. When a customer issues a promissory note to a business firm, the legal terms
ID: 2461024 • Letter: 3
Question
33. When a customer issues a promissory note to a business firm, the legal terms used to refer to the customer and the business firm are:
Customer
Business firm
a.
Maker
Payee
b.
Borrower
Payee
c.
Borrower
Maker
d.
Payee
maker
e.
None of the avove
34. On November 1,YR08, Sears received a $1,000, 4-month, 6% note receivable. When the note matures, Sears will receive the full face amount of $1,000 plus interest for the term of the note. How much interest revenue should be reported in YR08 on this note receivable? Assume the year end for Sears is December 31st.
a. $0 b. $10 c. $20 d. $40 e. none of the above
35. Kroger reported the following information for the most recent two year period.
Description
Dec. 31, YR04
Dec. 31, YR05
Account receivable, net (end of year balance)
$100
$140
Net Credit Sales (for the year)
$800
$900
Gross Profit (for the year)
$200
$220
For the year ended December 31, YR05 the company’s accounts receivable turnover rate is: (Round your answer to 2 decimal places.)
a.6.43 b. 6.42 c. 7.08 d. 7.50 e. none of the above
Customer
Business firm
a.
Maker
Payee
b.
Borrower
Payee
c.
Borrower
Maker
d.
Payee
maker
e.
None of the avove
Explanation / Answer
33. When a customer issues a promissory note to a business firm, the legal terms used to refer to the customer and the business firm are:
Customer
Business firm
a.
Maker
Payee
b.
Borrower
Payee
c.
Borrower
Maker
d.
Payee
maker
e.
None of the avove
Answer: a, A person who issues a Promissory note is always called a Maker or Issuer, to promise to make a payment of a sum of money to a person he owes money(Payee).
34. On November 1,YR08, Sears received a $1,000, 4-month, 6% note receivable. When the note matures, Sears will receive the full face amount of $1,000 plus interest for the term of the note. How much interest revenue should be reported in YR08 on this note receivable? Assume the year end for Sears is December 31st.
a. $0 b. $10 c. $20 d. $40 e. none of the above
Answer: b., Interest will be calculated @ 6% on $1000 for 2 months which comes to $10.(1000*6/100*2/12)
35. Kroger reported the following information for the most recent two year period.
Description
Dec. 31, YR04
Dec. 31, YR05
Account receivable, net (end of year
balance)
$100
$140
Net Credit Sales (for the year)
$800
$900
Gross Profit (for the year)
$200
$220
For the year ended December 31, YR05 the company’s accounts receivable turnover rate is: (Round your answer to 2 decimal places.)
a.6.43 b. 6.42 c. 7.08 d. 7.50 e. none of the above
Answer: d. Accounts Receivable Turnover= Net Credit Sales/ Average Accounts Receivable=900/120=7.5
Customer
Business firm
a.
Maker
Payee
b.
Borrower
Payee
c.
Borrower
Maker
d.
Payee
maker
e.
None of the avove
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