a.
To explain: Sight draft
Credit Instruments:
These are the documents or instruments used in replacement of currency. They are widely accepted nowadays. It is of many types.
a.
Answer to Problem 1CQ
Sight draft
- It is a type of bill of exchange which is payable immediately.
- It is used in international trade.
Explanation of Solution
- In this bill of exchange, payment cannot be delayed after presenting the draft.
- It is payable as soon as the seller shows the draft to buyer.
- There is no specific date of its maturity.
Sight draft is a type of bill of exchange which is payable immediately.
b.
To explain: Time draft
b.
Answer to Problem 1CQ
Time draft
- It is a type of bill of exchange.
- It is payable after a definite period of time or after happening of a particular situation.
Explanation of Solution
- It is a promise to pay in future.
- It is used with acceptance.
- It is generally used in international trade.
Time draft is payable after a definite period of time
c.
To explain: Banker’s acceptance
c.
Answer to Problem 1CQ
Bankers acceptance
- It is a type of bill of exchange.
- It is a short-term instrument.
Explanation of Solution
- It is a bill of exchange instrument, which is guaranteed by bank.
- It is a safe instrument.
Bankers acceptance is guaranteed by bank.
d.
To explain: Promissory Note
d.
Answer to Problem 1CQ
Promissory Note
- It is a type of financial instrument.
- The maker signs it.
Explanation of Solution
- In this note one party signs and promises to pay in writing a certain amount of money to the other party.
- It is paid in future or under a particular situation.
- The one who signs and writes the note is the maker and other party is payee.
Promissory Note is the one in which one party signs and promises to pay in writing a certain amount of money to the other party.
e.
To explain: Trade acceptance
e.
Answer to Problem 1CQ
Trade acceptance
- It is a type of bill of exchange.
- In this instrument the bank is not involved.
Explanation of Solution
- Purchaser on purchase of goods and services directly accepts this note.
- It is due at future time period.
- It is drawn by the purchaser for purchase of goods.
- Drawer for sale of goods draws it.
The purchaser on purchase of goods and services directly accepts trade acceptance.
Want to see more full solutions like this?
Chapter 28 Solutions
CORPORATE FINANCE--CONNECT ACCESS CARD
- Define each of the following terms:k. Accruals; trade creditarrow_forwardProvide a definition and the use/s of SWOT Analysis provide (Name, Year) or credits to where the credit is due.arrow_forwardMatching Select the term that best fits each of the following definitions and descriptions. a. Notes receivable b. Nontrade receivables c. Net realizable value d. Direct write-off method e. Interest-bearing note f. Maturity date g. Promissory note h. Factoring receivables i. Trade discount j. Present value k. Allowance method l. Sales discount m. Negotiable note n. Non-interest-bearing note o. Assignment of receivables p. Valuation date 11. A method of recognizing the actual losses from uncollectible accounts as expenses during the period in which the receivables are determined to be uncollectible. 12. The amount of cash expected to be received from the conversion of assets in the normal course of business. 13. The sale of receivables without recourse for cash to a third party, usually a bank or other financial institution. 14. Receivables that are evidenced by…arrow_forward
- Credit entry in a nominal amount isarrow_forwardIdentify which one of the following is also called as Fixed deposit account? a. Demand deposit b. Long term deposit c. Short term deposit d. Chequable depositarrow_forwardThe function of forward rate is generally used in ______. A. immediate transactions B. previous transactions C. bond transactions D. hedgingarrow_forward
- a debtor and a creditor record the same note, respectively, as a: A. note receivable and note payable. B. note payable and account payable. C. note payable and note receivable. D. note receivable and account receivable.arrow_forwardDefine Notes payable.arrow_forwardDoes Loan Meet Written Loan Policy and How Would Loan Be Affected By Changing Laws and Regulations refers to …………………. of the 5Cs of lending policy. * a. character b. conditions c. collateral d. controlarrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub