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LESSON 20-1

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.

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LESSON 20-1

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  1. LESSON 20-1 Promissory Notes

  2. 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 LESSON 20-1

  3. Principal Principal × × InterestRate InterestRate × × Time inYears Time as Fraction ofYear = = Interest forFraction of Year Interest forOne Year 90 360 INTEREST ON PROMISSORY NOTES page 590 Interest for One Year $20,000.00 × 6% × 1 = $1,200.00 Interest for Fraction of Year $20,000.00 × 6% × = $300.00 LESSON 20-1

  4. Principal + Interest = Maturity Value INTEREST ON PROMISSORY NOTES page 590 Maturity Value $20,000.00 + $300.00 = $20,300.00 LESSON 20-1

  5. May 18, 90-Day Note May18–May 31 13 days June 30 days July 31 days August 1–August 16 16 days Total 90 days 1 2 3 4 MATURITY DATE OF PROMISSORY NOTES page 591 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. LESSON 20-1

  6. 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 TERMS REVIEW page 592 LESSON 20-1

  7. LESSON 20-2 Notes Payable

  8. SIGNING A NOTE PAYABLE page 593 May 18. Signed a 90-day, 6% note, $20,000.00. Receipt No. 345. 1 2 3 4 5 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. LESSON 20-1

  9. PAYING PRINCIPLE AND INTEREST ON A NOTE PAYABLE 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. 2 3 4 1 6 7 5 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. LESSON 20-1

  10. SIGNING A NOTE PAYABLE FOR AN EXTENSION OF TIME 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. 1 2 1. Debit to Accounts Payable 2. Credit to Notes Payable LESSON 20-1

  11. PAYING A NOTE PAYABLE ISSUED FOR AN 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. LESSON 20-1

  12. TERMS REVIEW page 597 • current liabilities • interest expense LESSON 20-1

  13. LESSON 20-3 Notes Receivable

  14. ACCEPTING A NOTE RECEIVABLE FROM A CUSTOMER 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 2 1. Debit to Notes Receivable 2. Credit to Accounts Receivable LESSON 20-1

  15. COLLECTING PRINCIPAL AND INTEREST ON A NOTE RECEIVABLE 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. 2 3 4 1 7 5 6 1. Write the date. 5. On the next line, write the account title. 2. Write the account title. 6. Calculate and write the interest income amount. 3. Write the receipt number. 4. Write the principal amount. 7. Write the maturity value. LESSON 20-1

  16. RECORDING A DISHONORED NOTE RECEIVABLE 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 2 3 1. Debit to Accounts Receivable 2. Credit to Notes Receivable 3. Credit to Interest Income LESSON 20-1

  17. TERMS REVIEW page 602 • notes receivable • interest income • dishonored note LESSON 20-1

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