CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 10-1LESSON 10-1

Notes Receivable

Notes receivable.Issuing a note receivable.Calculating interest.Receiving cash for a note receivable.Dishonored notes receivable.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Competency: Accounting Adjustments and Competency: Accounting Adjustments and Valuation/Accounting for Notes Receivable, Valuation/Accounting for Notes Receivable, unearned revenue and Accrued Revenueunearned revenue and Accrued Revenue

Objectives43 Record accrued income.

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LESSON 10-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

ISSUING A NOTE RECEIVABLE FOR AN ISSUING A NOTE RECEIVABLE FOR AN ACCOUNT RECEIVABLEACCOUNT RECEIVABLE

April 3. Accepted a 30-day, 12% note from Duane Jansen for an extension of time on his account, $300.00. Note Receivable No. 11.

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

ISSUING A NOTE FOR A SALEISSUING A NOTE FOR A SALE

April 4. Accepted a 90-day, 12% note from Mark Carver for the sale of an appliance, $450.00. Note Receivable No. 12.

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

1. Calculate interest income.

2. Record note.

3. Record interest income.

4. Enter total cash received.

RECEIVING CASH FOR A RECEIVING CASH FOR A NOTE RECEIVABLENOTE RECEIVABLE page 292

May 3. Received cash for the maturity value of Note Receivable No. 11: principal, $300.00, plus interest, $3.00; total, $303.00. Receipt No. 452.

Principal Interest Rate

Fraction of Year = Interest× ×

$300.00 12%30

360 = $3.00× ×

4422 33

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

1. Calculate interest income.2. Record the debit for the total

amount receivable.

3. Record a credit for the note principal.

4. Record a credit for the interest income.

RECORDING A DISHONORED RECORDING A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 293

June 1. Ruth Javinsky dishonored Note Receivable No. 8, a 30-day, 12% note, maturity value due today; principal, $250.00; interest, $2.50; total, $252.50. Memorandum No. 120.

Principal Interest Rate Fraction of Year = Interest× ×

$250.00 12%30

360 = $2.50× ×

44

2233

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

RECEIVING CASH FOR A DISHONORED RECEIVING CASH FOR A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 294

MaturityValue

InterestRate

Fractionof Year = Additional

Interest× ×

1. Calculate number of days from maturity date to date of payment.2. Calculate additional interest income.

Time Number of DaysJune 1 through 30 29 (30 – 1 = 29)July 31August 31 September 1 through 30 30Total number of days 121 days 11

$252.50 12% 121360

= $10.18× × 22

September 30. Received cash from Ruth Javinsky for dishonored Note Receivable No. 8: maturity value, $252.50, plus additional interest, $10.18; total, $262.68. Receipt No. 201.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

3. Record payment of the account receivable.

4. Record additional interest income.

5. Enter total cash received.

RECEIVING CASH FOR A DISHONORED RECEIVING CASH FOR A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 294

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 10-1

TERMS REVIEWTERMS REVIEW

notes receivable dishonored note

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