A Company Received Two One-Year Notes in Payment for Merchandise

question 7

Multiple Choice

A company received two one-year notes in payment for merchandise sold. One note had a face amount of $6,000 and was interest-bearing at an annual rate of 18 percent. The other note had a face amount of $7,080 and was non-interest-bearing (its implied interest rate was 18 percent) .

• A) The total amount of cash ultimately to be received will be more for the interest-bearing note.
• B) Both notes will cause the same total interest to be recognized.
• C) The amount of interest revenue, which should be recognized, is more for the interest-bearing note.
• D) The amount, which should be credited to sales revenue, is more for the non-interest-bearing note.
• E) The non-interest-bearing note shows a higher book value immediately after the sale.

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Definitions:

Atypical Behavior

Behavior that deviates significantly from the norm within a society or cultural context, often suggesting the presence of psychological or developmental issues.

Socioeconomic Status (SES)

A person’s position in society as determined by income, occupation, education, and place of residence. (Sometimes called social class.)

Political Values

The set of beliefs and ideological principles that guide an individual's preferences and opinions about political policies and candidates.

Cohorts

groups of people banded together or treated as a group, often used in research to study changes across different age groups over time.