When a Note Receivable Is Discounted, the Business That Endorses

question 55

Multiple Choice

When a note receivable is discounted, the business that endorses the note becomes potentially liable to the bank. This type of liability is called a:

• A) dependent liability.
• B) contingent liability.
• C) potential liability.
• D) conditional liability.

---

Definitions:

Budgeted Sales

The projected amount of sales, often expressed in units or revenue, that a company expects to achieve in a specific period.

Production Budget

An estimate of the total units that must be produced in a given period to meet sales and inventory needs.

Sales Budget

An estimate of the expected sales revenue and selling expenses for a specific period, used for planning and control purposes.

Sales Budget

An estimate of the total sales revenue a company expects to earn over a specific period, often used for planning and control purposes.