1. Notes may be issued

a. to creditors to temporarily satisfy an account payablecreated earlier

b. when borrowing money

c. when assets are purchased

d. for all of these

2. On June 1, Davis Inc. issued an $60,800, 8%, 120-day notepayable to Garcia Company Assume that the fiscal year of Garciaends June 30. Using a 360-day year in your calculations, what isthe amount of interest revenue recognized by Garcia in thefollowing year? When required, round your answer to the nearestdollar.

a. $4,864

b. $1,230

c. $405

d. $811

3. On June 8, Williams Company issued an $83,765, 8%, 120-daynote payable to Brown Industries. Assuming a 360-day year for yourcalculations, what is the maturity value of the note? Whenrequired, round your answer to the nearest dollar.

a. $6,701

b. $83,765

c. $90,466

d. $85,999

4. A used machine with a purchase price of $41,809, requiring anoverhaul costing $9,833, installation costs of $6,615, and specialacquisition fees of $32,417, would have a cost basis of

a. $139,539

b. $90,674

c. $51,642

d. $41,809

5. When the market rate of interest on bonds is higher than thecontract rate, the bonds will sell at

a. their face value

b. a discount

c. their maturity value

d. a premium

6. On July 8, Jones Inc. issued an $82,100, 9%, 120-day notepayable to Miller Company. Assume that the fiscal year of Jonesends July 31. Using a 360-day year, what is the amount of interestexpense recognized by Jones in the current fiscal year? Whenrequired, round your answer to the nearest dollar.

a. $944

b. $7,389

c. $472

d. $1,416

7. A building with an appraisal value of $127,085 is madeavailable at an offer price of $150,980. The purchaser acquires theproperty for $37,892 in cash, a 90-day note payable for $24,353,and a mortgage amounting to $57,782. The cost basis recorded in thebuyer's accounting records to recognize this purchase is

a. $150,980

b. $120,027

c. $127,085

d. $113,088