TURE/False 1-) If a customer owes interest on accounts receivable, Interest Rece

Question

TURE/False

1-) If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited

2- A receivable is an amount due from another party

3-) If a credit card sale is made, the seller debits Cash and credits Sales for the same amount

4- ) A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

A) $50.00.

B) $150.00.

C) $75.00.

D) $37.50.

E) $87.50.

5-) A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

A) $900

B) $75

C) $450

D) $300

E) $1,800

6- Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements

7-Plant assets are defined as:

A) Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business.

B) Current assets.

C) Held for sale.

D) Intangible assets used in the operations of a business that have a useful life of more than one accounting period.

E) Tangible assets used in the operation of business that have a useful life of less than one accounting period

Explanation / Answer

Solution:

1) If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited --- FALSE

The correct treatment of this transaction is --- Debit Interest Receivable and Credit Interest Revenue

2- A receivable is an amount due from another party -- TRUE

An amount due from another party is called Receivable

3-) If a credit card sale is made, the seller debits Cash and credits Sales for the same amount -- FALSE

Under Credit Card Sale there is financing charges also involves in this type of sale.

Hence, the correct entry would be

Debit Cash

Debit Credit Card Expenses

Credit Sales Revenue

4) The correct option is A) $50

Notes Receivable Amount = $1,500

Interest Rate = 10%

Interest on maturity = $1,500 x 10% x 120 / 360 = $50

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.

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