lesson 20-1
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LESSON 20-1. Promissory Notes. 1. Number. 4. Time of a note. 2. Date of a note. 3. Payee. 5. Principle. 8. Maker. 6. Interest rate. 7. Maturity date. USES OF PROMISSORY NOTES. page 589. Principal. Principal. ×. ×. Interest Rate. Interest Rate. ×. ×. Time in Years. - PowerPoint PPT PresentationTRANSCRIPT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1LESSON 20-1
Promissory Notes
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
USES OF PROMISSORY NOTESUSES OF PROMISSORY NOTES page 589
1.1. Number1.1. Number
8.8. Maker8.8. Maker 7.7. Maturity date7.7. Maturity date6.6. Interest rate6.6. Interest rate5.5. Principle5.5. Principle
3.3. Payee3.3. Payee
2.2. Date of a note2.2. Date of a note4.4. Time of a note4.4. Time of a note
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Interest forOne Year
=Time inYears
×Interest
Rate×Principal
INTEREST ON PROMISSORY NOTESINTEREST ON PROMISSORY NOTES page 590
Interest for One Year
$1,200.00=1×6%×$20,000.00
Interest forFraction of
Year=
Time as Fraction of
Year×
InterestRate
×Principal
Interest for Fraction of Year
$300.00=×6%×$20,000.0090
360
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Maturity Value
=Interest+Principal
INTEREST ON PROMISSORY NOTESINTEREST ON PROMISSORY NOTES page 590
Maturity Value
$20,300.00=$300.00+$20,000.00
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
MATURITY DATE OF PROMISSORY MATURITY DATE OF PROMISSORY NOTESNOTES page 591
May 18, 90-Day NoteMay18–May 31 13 days
June 30 days
July 31 days
August 1–August 16 16 days
Total 90 days
3344
1122
1. Subtract the date of the note from the number of days in the first month.
2. Add 30 days for June.
3. Add 31 days for July.
4. Add only 16 days in August.
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
TERMS REVIEWTERMS REVIEW
number of a note date of a note payee of a note time of a note principal of a note interest rate of a note maturity date of a note
maker of a note promissory note creditor notes payable interest maturity value
page 592
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-2LESSON 20-2
Notes Payable
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
SIGNING A NOTE PAYABLESIGNING A NOTE PAYABLE
1122 33 44 55
page 593
May 18. Signed a 90-day, 6% note, $20,000.00. Receipt No. 345.
1. Write the date.
2. Write the account title.
3. Write the receipt number.
4. Write the principle amount in the General Credit column.
5. Write the same amount in the Cash Debit column.
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
PAYING PRINCIPLE AND INTEREST ON A PAYING PRINCIPLE AND INTEREST ON A NOTE PAYABLENOTE PAYABLE
11
2233 44
5566
page 594
August 16. Paid cash for the maturity value of the May 18 note: principal, $20,000.00, plus interest, $300.00; total, $20,300.00. Check No. 721.
77
1. Write the date. 6. Write the interest expense amount.2. Write the account title.
7. Write the amount of cash paid.
3. Write the check number.4. Write the note’s principal amount.
5. Write the account title.
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
SIGNING A NOTE PAYABLE FOR AN SIGNING A NOTE PAYABLE FOR AN EXTENSION OF TIMEEXTENSION OF TIME
11
22
page 595
June 5. Restaurant Supply signed a 90-day, 12% note to Hayport Company for an extension of time on its account payable, $4,000.00. Memorandum No. 66.
2. Credit to Notes Payable
1. Debit to Accounts Payable
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
PAYING A NOTE PAYABLE ISSUED FOR PAYING A NOTE PAYABLE ISSUED FOR AN EXTENSION OF TIMEAN EXTENSION OF TIME page 596
September 3. Paid cash for the maturity value of the note payable to Hayport Company: principal, $4,000.00, plus interest, $120.00; total, $4,120.00. Check No. 722.
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
TERMS REVIEWTERMS REVIEW
current liabilities interest expense
page 597
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-3LESSON 20-3
Notes Receivable
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
ACCEPTING A NOTE RECEIVABLE FROM ACCEPTING A NOTE RECEIVABLE FROM A CUSTOMERA CUSTOMER
11
22
page 598
April 14. Accepted a 90-day, 8% note from Martin Sterling for an extension of time on his account, $3,000.00. Note Receivable No. 9.
1. Debit to Notes Receivable
2. Credit to Accounts Receivable
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
COLLECTING PRINCIPAL AND INTEREST COLLECTING PRINCIPAL AND INTEREST ON A NOTE RECEIVABLEON A NOTE RECEIVABLE
11 22 33 44
55 66
page 599
July 13. Received cash for the maturity value of Note Receivable No. 9, a 90-day, 8% note: principal, $3,000.00, plus interest, $60.00; total, $3,060.00. Receipt No. 562.
77
1. Write the date.
2. Write the account title.
5. On the next line, write the account title.
3. Write the receipt number. 6. Calculate and write the interest income amount.4. Write the principal amount.
7. Write the maturity value.
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
RECORDING A DISHONORED NOTE RECORDING A DISHONORED NOTE RECEIVABLERECEIVABLE
11
2233
page 600
May 6. Jill Davis dishonored Note Receivable No. 12, a 90-day, 8% note, maturity value due today: principal, $600.00; interest, $12.00; total, $612.00. Memorandum No. 92.
1. Debit to Accounts Receivable
2. Credit to Notes Receivable
3. Credit to Interest Income
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LESSON 20-1CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
TERMS REVIEWTERMS REVIEW
notes receivable interest income dishonored note
page 602