Question

14. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Usu Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a a. credit to Interest Revenue for $300 b. debit to Notes Receivable for $20,000 c. credit to Notes Receivable for $20,300 d. debit to Interest Receivable for $300 The objectives of intenal control are to a. control the intermal organization of the accounting department personnel and equipment b. prevent fraud, and promote the social interest of the company c. provide control over "internal-use only" reports and employee internal conduct d. provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with 15. 11

Answer 1

14) - a) Credit to Interest Revenue for $300

          Because the terms of the note stated that the face value is $20,000 and interest rate is 6%. On October 30 the 90 days period is ended, so the company is going to receive interest for this 90 days period also. Assume that a year has 360 days.

             = $20,000 * 6% *90/360 = $300

15) - d) Provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with

       The remaining options are incorrect because the Internal control is not only confined to accounting department personnel and equipment, and Internal control cannot completely prevent fraud from happening and it should have control over every report regarding the Internal Control not merely Internal Use Reports.

The main objectives of Internal Control include those which are stated in Option D.