Question

1, Valley Spa purchased $8,400 in plumbing components from Tubman Co. Valley Spa Studios signed a 120-day, 10% promissory note for $8,400. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.)

Multiple Choice

• $8,400

• $8,680

• $8,650

• $280

• $8,730

2,

Jervis sells $3,100 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 2% factoring fee. What entry should Jervis make to record the transaction?

Multiple Choice

• Debit Accounts Receivable $3,038; debit Factoring Fee Expense $62; credit Cash $3,100.

• Debit Cash $3,038; debit Factoring Fee Expense $62; credit Accounts Receivable $3,100

• Debit Cash $3,100; credit Factoring Fee Expense $62; credit Accounts Receivable $3,100

• Debit Cash $3,038; credit Accounts Receivable $3,038

• Debit Accounts Receivable $3,100; credit Factoring Fee Expense $62; credit Cash $3,038

Answer 1

1) Due Amount = 8400+(8400*10%*120/360) = 8680

So answer is b) $8680

2) Journal entry

date	account and explanation	Debit	Credit
	Cash (3100*98%)	3038
	Factoring fees	62
	Account receivable		3100

So answer is b) Debit Cash $3,038; debit Factoring Fee Expense $62; credit Accounts Receivable $3,100