Reference no: EM1311047

Objective type questions on annual interest rate and accounts receivable.

1. Market, Inc. received two notes from customers for sales that it made to them in 2008. The notes included:

Note A: Dated 5/31/08, principal of $120,000 and interest due 3/31/09.

Note B: Dated 7/1/08, principal of $200,000 and interest at 8% annually, due on 4/1/09.

Market reported accrued interest receivable from these notes of $14,400 on its 12/31/08 balance sheet. What is the annual interest rate on Note A?

A. 9.14%

B. 8%

C. 9.74%

D. 9.44%

The following facts relate to Questions 2 through 4

2. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's 2008 bad debt expense is:

A. $1,720

B. $1,650

C. $1,505

D. $1,575

3. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's accounts receivable at December 31, 2008, are:

A. $467,000

B. $473,280

C. $465,280

D. $469,280

4. Calistoga Produce estimates bad debt expense at 1/2 % of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650 respectively, at December 31, 2007. During 2008, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in bad accounts was written off. Calistoga's adjusted allowance for uncollectible accounts at December 31, 2008, is:

A. $1,575

B. $1,505

C. $1,650

D. $1,720

5. The largest expense on a retailer's income statement is typically:

A. Salaries and wages.

B. Cost of goods sold

C. Income tax expense

D. Depreciation expense

6. In a periodic inventory system, the cost of goods sold is determined:

A. each time a sale occurs

B. each time a purchase occurs

C. at the end of the accounting period

D. None of the above

7. In a perpetual inventory system, the cost of purchases is debited to:

A. Purchases

B. Cost of goods sold

C. Inventory

D. Accounts payable