LESSON 20-1 Promissory Notes

USES OF PROMISSORY NOTES page 589 1. Number 2. Date of a note 4. Time of a note 3. Payee 5. Principle 6. Interest rate 7. Maturity date 8. Maker

INTEREST ON PROMISSORY NOTES page 590 Interest for One Year Interest for One Year = Time in Years × Interest Rate Principal $20,000.00 × 6% × 1 = $1,200.00 Interest for Fraction of Year Interest for Fraction of Year = Time as Fraction of Year × Interest Rate Principal $20,000.00 × 6% × 90 360 = $300.00

INTEREST ON PROMISSORY NOTES page 590 INTEREST ON PROMISSORY NOTES Maturity Value Maturity Value = Interest + Principal $20,300.00 = $300.00 + $20,000.00

MATURITY DATE OF PROMISSORY NOTES page 591 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 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 20-2 Notes Payable

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.

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. 1 2 3 4 5 6 7 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.

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

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 20-3 Notes Receivable

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

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. 1 2 3 4 5 6 7 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.

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 The slides in this tutorial were based a PowerPoint presentation provided by South-Western Century 21 Accounting. The slides were edited and Microsoft Action Script characters were added to help meet the needs of my students.