Book 1 - Chapter 7

Reinforcement Problems
LG	7-1.

	Name of the Item
a. formal written promise by someone else to pay cash to our business	Note receivable
b. Amounts owing suppliers or service providers, usually due in 30–90 days	less
c. Items needed for the daily operation of a business and consumed in a year or less	Supplies
d. Money that is collectible in addition to a note receivable	Interest receivable
e. Currency on hand, plus amounts in checking and savings accounts	Cash
f. A formal written promise by our business to pay someone else	Note payable
g. Amounts owed to us by our customers, usually due in 30–90 days	Accounts receivable
h. Money that is owed because of item (f), above, but is not yet paid	Interest payable
i. A payment to a provider of services or goods before they are received	Prepaid expense
j. The receipt of a prepayment from a customer before providing goods or services to that customer	Unearned revenue

    LG 7-2. An account receivable is money that is receivable from a customer as a result of making a
         sale and is normally due in 30–90 days. A note receivable is a formal written promise to pay money
         to your business by someone else. A note receivable is normally due any time from several
         months to many years depending on the terms of the particular note. Interest is the cost of
         borrowing money. (You could think of it as the “rental” charge for money.) Interest receivable is
         the interest that the holder of the note is expecting to receive from the borrower for the use of the
         money for a particular period of time that has elapsed.

    LG 7-3. Office supplies are assets that are consumed quickly (in less than a year) in the normal
         course of business (such as paper, pens and pencils, paper clips, and copy machine toner). Office          equipment is a category of assets that have a much longer useful life (greater than a year) and are
         used up slowly (such as desks, file cabinets, and computers).

Learning Goal 7

SOLUTIONS

Learning Goal 7: Identify Common Assets and Liability

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