Notes Receivable ________

question 121

Multiple Choice

Notes receivable ________.

• A) represent an oral promise to pay a fixed amount of principal plus interest on the maturity date
• B) are included in a miscellaneous category called other receivables
• C) are due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets
• D) are supported by a promissory note

Understand how promissory notes affect financial statements, particularly regarding current assets and liabilities.

Record transactions involving promissory notes, including issuance, payment, and extension.

Comprehend the accounting implications of promissory notes on accounts payable and receivable.

Understand the process and accounting implications of renewing a note at maturity.

---

Definitions:

Useful Life

The estimated period over which an asset is expected to be usable for its intended purpose, affecting depreciation calculations.

Economic Value

A measure of the benefit provided by a good or service to an economic agent, often quantified in terms of willingness to pay or the added utility it offers.

Operating Cost

Expenses related to the day-to-day functioning of a business, such as rent, utilities, salaries, and equipment maintenance.

Useful Life

The estimated period over which a tangible asset is expected to be functional and contribute to the operations of a business.