1. Harvey loaned $50 to Chase and received a promissory note. Chase is the
A. maker.
B. drawee.
C. payee.
D. debtor.
2. A promissory note
A. is a written promise to pay.
B. is an oral promise to pay.
C. is due in 30 days.
D. entitles the maker to a discount.
3. Which of the following would not be used to pay for previous credit purchases under the periodic system?
A. Debit to Accounts Payable
B. Credit to Purchase Discounts
C. Credit to Accounts Payable
D. Credit to Cash
4. Martin Company needs additional time to pay its accounts payable to Boster Company. Martin makes a written promise to pay Boster the amount on a certain date. Boster records this transaction by debiting
A. Notes Receivable and crediting Accounts Receivable.
B. Cash and crediting Accounts Receivable.
C. Accounts Receivable and crediting Notes Receivable.
D. Notes Receivable and crediting Cash.
5. The advantage of the weighted-average method is that
A. an equal cost is assigned to each unit, so net income doesn’t fluctuate as much as with other methods.
B. the flow of goods and flow of costs are the same.
C. it matches current selling prices and current costs.
D. old costs are matched against current income
6. David borrows $2,000 from Matthew and gives him a promissory note. Matthew is the
A. payee.
B. payer.
C. maker.
D. drawer.
7. Which inventory method produces the lowest income tax during a period of inflation?
A. LIFO
B. FIFO
C. Weighted-average
D. All of the above would have the same tax effect.
8. The person or company that borrows money and signs a promissory note payable is the
A. drawee.
B. drawer.
C. payee.
D. maker.
9. When an interest-bearing note comes due and is uncollectible, the journal entry includes debiting
A. Notes Receivable and crediting Accounts Receivable.
B. Notes Receivable and crediting Accounts Receivable and Interest Revenue.
C. Accounts Receivable and crediting Interest Revenue.
D. Accounts Receivable and crediting Notes Receivable and Interest Revenue.
10. Cory issued a note to his creditor in exchange for an account. Cory records the transaction by debiting
A. Notes Payable and crediting Accounts Payable.
B. Notes Receivable and crediting Accounts Receivable.
C. Accounts Payable and crediting Notes Payable.
D. Accounts Receivable and crediting Notes Payable.
11. Under the periodic inventory system, in addition to making the entry to record a sale, a company would
A. debit Merchandise Inventory and credit Cost of Goods Sold.
B. debit Cost of Goods Sold and credit Merchandise Inventory.
C. debit Cost of Goods Sold and credit Purchases.
D. make no additional entry.
12. Jane borrowed $1,000 from West Bank and signed a promissory note. Jane is the
A. payee.
B. drawee.
C. creditor.
D. maker.
13. James borrowed $550 from Tracy. James promised in writing that he would repay the money to Tracy on May 13, 2013. At the time of the loan, Tracy recorded the transaction as a/an
A. accounts receivable.
B. accounts payable.
C. promissory note receivable.
D. promissory note payable.
14. Brooke Company grants James Decorating additional time to pay its past-due account. James makes a written promise to pay Brooke the amount on a certain date. James records this transaction by debiting
A. Notes Receivable and crediting Accounts Receivable.
B. Cash and crediting Accounts Receivable.
C. Accounts Receivable and crediting Notes Receivable.
D. Accounts Payable and crediting Notes Payable.
15. One advantage of the LIFO method is that
A. an equal cost is assigned to each unit, so net income doesn’t fluctuate as much as with other methods.
B. flow of goods and flow of costs are the same.
C. it matches current selling prices and current costs.
D. ending inventory is valued at very old costs.
16. Morris Law Firm is borrowing $10,000 at 6% interest for one year. The $10,000 is the
A. proceeds.
B. principal.
C. amount of interest.
D. net amount.
17. The weighted-average method
A. calculates an average unit cost by dividing the total cost of goods sold by the total units sold.
B. calculates an average unit cost by dividing the total cost of goods available for sale by the total units of goods available for sale.
C. calculates an average unit cost by adding the total cost of goods available for sale to the total units of goods available for sale.
D. None of the above
18. A written promise to pay a certain sum of money to another person or company is a
A. promissory accounts payable.
B. promissory note payable.
C. promissory accounts receivable.
D. promissory note receivable.
19. Which method assumes that the most recently acquired goods are sold first?
A. LIFO
B. FIFO
C. Specific invoice method
D. Weighted-average method
20. The inventory method where the cost flows tend to follow the physical flow is
A. LIFO.
B. FIFO.
C. weighted-average.
D. specific invoice.
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