In Discounting Notes Receivable, a Financial Institution Generally Discounts at a Higher

question 5

Multiple Choice

In discounting notes receivable, a financial institution generally discounts at a higher interest rate than stated in the note as it assumes _____ risk of maker's possible default.

• A) increased
• B) decreased
• C) equal
• D) no

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Definitions:

Natural Resource

Assets derived from the earth, such as minerals, forests, and water, which are used to produce goods and services.

Depletion Expense

The allocation of the cost of natural resources over their useful life, representing the exhaustion of mineral, oil, or gas deposits.

Mineral Deposit

A naturally occurring accumulation of minerals that can be extracted for economic benefit.

Journalize

The act of recording transactions in an accounting journal, noting the debit and credit aspects of each transaction.