INTAC - CHAPTER 9

Question 1

If a note receivable is discounted with recourse

a. A contingent liability does not exist.
b. Note receivable discounted is credited.
c. Liability for note receivable discounted is credited.
d. Note receivable must be credited.

Answer 1

b. Note receivable discounted is credited.

Question 2

The note receivable discounted account is reported as

a. Contra asset account for the proceeds from discounting

b. Contra asset account for the face amount of the note

c. Liability account for the proceeds from the discounting

d. Liability account for the face amount of the note

Answer 2

b. Contra asset account for the face amount of the note

Question 3

If a note receivable is discounted without recourse

a. The contingent liability may be disclosed
b. Liability for note receivable discounted is credited
c. Note receivable is credited
d. The transaction is a secured borrowing

Answer 3

c. Note receivable is credited

Question 4

Note receivable discounted with recourse should be

a. Excluded from total receivables without disclosure

b. Excluded from total receivables with disclosure

c. Included in total receivables without disclosure

d. Included in total receivables with disclosure

Answer 4

b. Excluded from total receivables with disclosure

Question 5

After being held for 40 days, a 120-day 12% interest bearing note receivable was discounted at a bank at 15%. The net proceeds from discounting are equal to

a. Maturity value less the discount at 12%
b. Maturity value less the discount at 15%
c.Face amount less the discount at 12%
d. Face amount less the discount at 15%

Answer 5

b. Maturity value less the discount at 15%