2.1

1.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. Martin records this transaction as follows:

A-debit Notes Payable; credit Accounts Payable.

B-debit Cash; credit Accounts Payable.

C-debit Accounts Payable; credit Notes Payable.

D-debit Notes Payable; credit Cash.

2.Tricia's Decor purchased merchandise from House Beautiful and issued a promissory note. Tricia should record the transaction as:

A-debit Purchases and credit Notes Payable for the principal amount of the note.

B-debit Purchases and credit Notes Payable for the maturity value of the note.

C-debit Purchases and credit Accounts Payable for the face amount of the note.

D-debit Purchases and credit Accounts Payable for the maturity value of the note.

3.For the payee, being given additional time to settle an account with issuance of a note results in a shift of:

A-assets from Notes Receivable to Accounts Receivable.

B-assets from Accounts Receivable to Notes Receivable.

C-liabilities from Notes Payable to Accounts Payable.

D-liabilities from Accounts Payable to Notes Payable.

4.When an interest-bearing note comes due and is uncollectible, the journal entry includes:

A-debiting Notes Receivable; crediting Accounts Receivable.

B-debiting Notes Receivable; crediting Accounts Receivable and Interest Revenue.

C-debiting Accounts Receivable; crediting Interest Revenue.

D-debiting Accounts Receivable; crediting Notes Receivable and Interest Revenue

5.If a company does not pay its note payable on the agreed upon date, the note:

A-is renewed automatically for the same period of time.

B-is discounted at a higher rate of interest.

C-is dishonored by the vendor.

D-is automatically placed in collection with an outside agency.

6.Jeff Company issues a promissory note to David Company to get extended time on an account payable. Jeff Company records this transaction as follows:

A-debit Accounts Receivable; credit Notes Receivable.

B-debit Notes Receivable; credit Accounts Receivable.

C-debit Notes Payable; credit Accounts Payable.

D-debit Accounts Payable; credit Notes Payable.

7.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. Brooke Company records this transaction as follows:

A-debit Notes Receivable; credit Accounts Receivable.

B-debit Cash; credit Accounts Receivable.

C-debit Accounts Receivable; credit Notes Receivable.

D-debit Accounts Payable; credit Notes Payable.

8.Cory issued a note to his creditor in exchange for an account. Cory records the transaction as follows:

A-debit Notes Payable; credit Accounts Payable.

B-debit Notes Receivable; credit Accounts Receivable.

C-debit Accounts Payable; credit Notes Payable.

D-debit Accounts Receivable; credit Notes Payable.

9.Straight Company sold merchandise to Cross Company and received a promissory note from Cross. Straight should record the transaction as:

A-debit Notes Receivable and credit Sales for the principal amount of the note.

B-debit Notes Receivable and credit Sales for the maturity value of the note.

C-debit Accounts Receivable and credit Sales for the maturity amount of the note.

D-debit Accounts Receivable and credit Sales for the principal amount of the note.

10.On November 10, Twister Rides issued a 12%, 60-day, $10,000 promissory note. Twister should record the payment of the note on the maturity day as:

A-debit Notes Payable $10,200; credit Cash $10,200.

B-debit Notes Payable $10,000; debit Interest Expense $200; credit Cash $10,200.

C-debit Notes Payable $10,000; debit Interest Payable $200; credit Cash $10,200.

D-debit Notes Payable $10,000; credit Cash $10,000.