ACC 501 Exam Practice 2 Questions with Complete
Solutions
What is a promissory note?
A loan issued by a company to customers or employees.
What are the key features of a promissory note?
Maker, Payee, Principal, Interest, Maturity Date, Collateral.
What is the interest revenue earned by UNH Co. on a $15,000 loan at 6% for one year?
$900
What is the cash flow from investing activities when UNH Co. loans money?
Net outflow from investing activities.
What is the cash flow from operating activities when UNH Co. recognizes interest revenue?
Inflow from operating activities.
What happens to UNH's financial statements when accrued interest is recognized?
Assets and interest revenue increase.
What is the impact of accepting a credit card payment of $2,700 with a 5% fee?
Assets increase by $2,565, revenue by $2,700, and expenses by $135.
What is the total revenue recognized by UNH Co. after a 3% service fee on $10,000?
$9,700
Which account would not appear on a balance sheet?
, Service Revenue
What is the prepaid insurance expense for Doe Company after paying $2,520 for a one-
year policy?
$1,260 at Year 2.
What was the total assets increase for Bledsoe Company during Year 1?
$22,100
What is the balance of the Allowance for Doubtful Accounts before recognizing
uncollectible accounts expense?
$950
What is the adjusting entry required to record Uncollectible Accounts Expense for UNH
Co.?
The difference needed to reach the estimated allowance based on aging.
What is the significance of the maturity date in a promissory note?
It is the date when the principal and interest must be repaid.
What percentage of receivables from 31 to 60 days past due does UNH Co. estimate to be
uncollectible?
10%
What is the cash flow effect of writing off uncollectible accounts?
No immediate cash flow effect; it reduces accounts receivable.
Solutions
What is a promissory note?
A loan issued by a company to customers or employees.
What are the key features of a promissory note?
Maker, Payee, Principal, Interest, Maturity Date, Collateral.
What is the interest revenue earned by UNH Co. on a $15,000 loan at 6% for one year?
$900
What is the cash flow from investing activities when UNH Co. loans money?
Net outflow from investing activities.
What is the cash flow from operating activities when UNH Co. recognizes interest revenue?
Inflow from operating activities.
What happens to UNH's financial statements when accrued interest is recognized?
Assets and interest revenue increase.
What is the impact of accepting a credit card payment of $2,700 with a 5% fee?
Assets increase by $2,565, revenue by $2,700, and expenses by $135.
What is the total revenue recognized by UNH Co. after a 3% service fee on $10,000?
$9,700
Which account would not appear on a balance sheet?
, Service Revenue
What is the prepaid insurance expense for Doe Company after paying $2,520 for a one-
year policy?
$1,260 at Year 2.
What was the total assets increase for Bledsoe Company during Year 1?
$22,100
What is the balance of the Allowance for Doubtful Accounts before recognizing
uncollectible accounts expense?
$950
What is the adjusting entry required to record Uncollectible Accounts Expense for UNH
Co.?
The difference needed to reach the estimated allowance based on aging.
What is the significance of the maturity date in a promissory note?
It is the date when the principal and interest must be repaid.
What percentage of receivables from 31 to 60 days past due does UNH Co. estimate to be
uncollectible?
10%
What is the cash flow effect of writing off uncollectible accounts?
No immediate cash flow effect; it reduces accounts receivable.
