Answered: 26) The cash payment or PMT for a Note…

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26) The cash payment or PMT for a Note Payable (installment loan) includes only interest on the loan. TRUE FALSE

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 14RQ

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26) The cash payment or PMT for a Note Payable (installment loan) includes only interest on the loan.
TRUE
FALSE

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What is a key difference between a short-term note payable and a current portion of a noncurrent note payable?
At the maturity of a note payable, a borrower will pay ________. A. the interest amount only B. the principal plus interest C. the principal amount only D. the principal minus interest
Which of the following is true? Short-term notes payable should be discounted at its present value, more so, if it constitutes a financing transaction and the imputed interest can be measured without undue cost or effort. Transaction costs of issuing financial liabilities are expensed outright. The present value of a serial note's principal is computed by using the PV of 1 as the present value factor. Notes payable are obligations supported by creditor's promissory notes.
When a borrower receives the face amount of a discounted note less the discount, the amount received is known as a.the note deferred interest b.the note principal c.the note proceeds d.the note discount
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Which of the following statements is correct? If the note is issued at a discount, the interest income to be recognized every period is a. Either higher or lower than the amount of cash received for interest depending on the amount of the discount b. Equal to the amount of cash received for interest c. Lower than the amount of cash received for interest d.
1. Explain how an installment loan differs from revolving credit in terms of risk and the nature of the return to the lender.
Which of the following is not true about the discount on short-term notes payable? a. The Discount on Notes Payable account should be reported as an asset on the balance sheet. b. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. c.The Discount on Notes Payable account has a debit balance. d. Discount on Notes Payable is a contra account to Notes Payable.
Which of the following terms does not refer to the amount that is paid by the note issuer to the creditors at the end of the life of the note? a. Face value b. Maturity value c. Carrying value d. Principal amount
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Which of the following accounts are used when a short-term note payable with 5% interest is honored (paid)? A. short-term notes payable, cash B. short-term notes payable, cash, interest expense C. interest expense, cash D. short-term notes payable, interest expense, interest payable
When a business borrows money from a bank on a non-interest-bearing note, how are the bank discount and proceeds calculated?