Review - Chapter 7 Notes Receivable: o Note Issued at Par...

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Chapter 7 Notes Receivable: o Note Issued at Par Stated Rate = Market Rate Present Value of Note = Face Value of Note Calculations PV of Note = Face Value * PV1 (n, Market) + (Face value x Stated Rate) * PVOA (n, Market) Journal Entry DR: Notes Receivable Face Value o CR: Cash Present Value o Note Issued at Premium Stated Rate > Market Rate Present Value of Note > Face Value of Note Calculations PV of Note = Face Value * PV1 (n, Market) + (Face value x Stated Rate) * PVOA (n, Market) Journal Entry DR: Notes Receivable Face Value DR: Premium on Notes Receivable Difference o CR: Cash Present Value o Note Issued at Discount Stated Rate < Market Rate Present Value of Note < Face Value of Note Calculations PV of Note = Face Value * PV1 (n, Market) + (Face value x Stated Rate) * PVOA (n, Market) Journal Entry DR: Notes Receivable Face Value o CR: Discount on Notes Receivable Difference o CR: Cash Present Value o Opposite for Note Payable o Zero Interest Bearing Note Initial Transaction DR: Note Receivable Owe you o CR: Cash/Consulting Revenue Amount Lent o CR: Discount Difference Recognition of Interest Each Year DR: Discount Amount Lent* Interest Rate o CR: Interest Revenue Same Amount Collection at Maturity DR: Cash Owe You o CR: Notes Receivable Owe You o Effective Interest Amortization Method: Journal Entry Year 1
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Interest Revenue = (Notes Receivable – Discount) * Market Rate o DR: Cash Face Value * Stated Rate o DR: Discount on N/R Difference CR: Interest Revenue Calculated AMT Year 2 through year before the Last year Interest Revenue = (Notes Receivable – (Discount – Previous Year) * Market Rate o DR: Cash Face Value * Stated Rate o DR: Discount on N/R Difference CR: Interest Revenue Calculated AMT Last Year Interest Revenue = (Notes Receivable – (Discount – Previous Year) * Market Rate o DR: Cash Face Value * Stated Rate o DR: Discount on N/R Difference CR: Interest Revenue Calculated AMT o DR: Cash Face Value CR: Notes Receivable Face Value o Accept a Note for Items other than Cash/Secured Borrowing Sell Land DR: Notes Receivable: Face Value of Note o CR: Land: Cost on Books o CR: Discount: Difference o CR: Gain On Sale Market Value – Cost on Books Render Services DR: Notes Receivable Maturity Value o CR: Discount On Notes Receivable Difference o CR: Service Revenue *BELOW* * Service Revenue Calculation o 1. PV of the maturity value of the note Use Chart of present value of 1 single sum o 2. Present value of how much you pay annually Exchange rate * Maturity value Then use Chart Present value of an ordinary annuity o 3. Service Revenue Add 1 and 2 Using Accounts Receivable as Collateral Transfer of Receivables o DR: Cash Difference o DR: Finance Charge Receivables * Finance Charge CR: Notes Payable Note Amount Pay back o DR: Note Payable
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Review - Chapter 7 Notes Receivable: o Note Issued at Par...

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