Questions 1 through 5 use the following data:
On August 1, 2012, Azores, Inc., sold equipment and accepted a six-month, 11%, $30,000 note receivable. Azoresâ€™ year-end is December 31.
1. How much interest revenue should Azores accrue on December 31, 2012?
2. If Azores, Inc., fails to make an adjusting entry for the accrued interest,
a. net income will be understated and liabilities will be overstated.
b. net income will be understated and assets will be understated.
c. net income will be overstated and assets will be overstated.
d. net income will be overstated and liabilities will be understated.
3. How much interest does Azores, Inc., expect to collect on the maturity date (February 1, 2013)?
4. Which of the following accounts will Azores credit in the journal entry at maturity on February 1, 2013, assuming collection in full?
a. Interest Receivable
b. Interest Payable
c. Note Payable
5. Write the journal entry on the maturity date (February 1, 2013).
6. Which of the following is included in the calculation of the quick (acid-test) ratio?
a. Prepaid expenses and cash
b. Cash and accounts receivable
c. Inventory and short-term investments
d. Inventory and prepaid expenses
7. A company with net sales of $1,095,000, beginning net receivables of $90,000, and ending net receivables of $114,000 has daysâ€™ sales in accounts receivable of
a. 34 days.
b. 37 days.
c. 31 days.
d. 40 days.
8. A company sells on credit terms of â€ś2/10, n/30â€ť and has daysâ€™ sales in account receivable of 30 days. Its daysâ€™ sales in receivables is
a. too low.
b. too high.
c. about right.
d. not able to be evaluated from the datagiven.