On January 1, Jasmine Bought a Speedboat from Malcolm

question 69

Multiple Choice

On January 1, Jasmine bought a speedboat from Malcolm. The purchase price was $100 000. Jasmine gave Malcolm a promissory note for $100 000. The note was payable in five monthly instalments beginning on March 1. Which of the following statements is TRUE?

• A) Jasmine's promissory note cannot contain an acceleration clause because it is payable in instalments.
• B) A promissory note, like a bill of exchange, must have a drawee.
• C) Because a promissory note must be for a "sum certain," the note that Jasmine created could not require her to pay interest on the purchase price of $100 000.
• D) If Malcolm is unable to recover any money under the promissory note, he must sue Jasmine on the basis of their sales contract, rather than on the basis of the promissory note itself.
• E) After each installment payment, Jasmine should make sure that Malcolm writes a receipt onto the promissory note itself.

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Definitions:

Maturity Value

The total amount payable to an investment's holder at the investment's maturity date, including the principal and any interest earned.

Maker

In financial terms, the maker is typically the person who creates or signs a promissory note, thereby agreeing to pay the note’s value at maturity.

Notes Receivable

Represents claims against others, recorded by promissory notes, for money to be paid to the company.

Journal Entry

The recordation of a financial transaction in an accounting system, showing the accounts and amounts debited and credited.