When the Maker of a Note Defaults

question 97

Multiple Choice

When the maker of a note defaults:

• A)An account receivable is recorded for the principal amount of the note only.
• B)An account receivable is recorded in the amount of the principal plus interest through the maturity date.
• C)Any interest earned for the current period is not recorded,since the maker has defaulted.
• D)Any interest earned in a previous period that has already been recorded as interest receivable is written off as a loss due to the maker's default.

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Definitions:

Journal Entries

Recorded transactions in the accounting journal that show the financial activities of a company.

Marketable

Describes assets or securities that can easily be sold or converted into cash without a significant loss in value.

Cash Dividend

A payout from the company's profits, determined by the board of directors, given to certain shareholders as cash.

Trading Securities Portfolio

A collection of marketable securities that a business holds for the purpose of reselling them in the short term to profit from market price changes.