A Promissory Note

question 18

Multiple Choice

A promissory note:

• A) Is another name for an installment receivable.
• B) Is a short-term investment for the maker.
• C) Is a written promise to pay a specified amount of money at a certain date.
• D) Is a liability to the payee.
• E) Cannot be used in payment of an account receivable.

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Definitions:

Useful Life

The estimated duration a fixed asset is expected to be economically usable, with normal repairs and maintenance, for its intended purpose.

Cash Payback Period

The duration it takes for an investment to generate an amount of cash equal to the initial investment cost.

Salvage Value

The estimated residual value of an asset at the end of its useful life, representing what it could be sold for or its scrap value.

Straight-Line

A depreciation method that equally spreads the cost of an asset over its useful life.