Note Receivable and Interest

Note Receivable and Interest - 1,000.00 Interest Receivable...

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Note Receivable Exchange a Note Receivable for an Accounts Receivable Notes Receivable 1,000.00 Accounts Receivable 1,000.00 Date of exchange is January 1, 2010 Note is due April 30, 2010 Annual (Yearly) Interest Rate is 12% Simple Interest
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Interest Calculation Calculate Amount of Interest for a Year Annual (Yearly) Fraction of Face Value x Interest Rate x a Year = Interest $1,000 x 12% x 12/12 = $120 for 1 year Calculate Amount of Interest for a Month Annual (Yearly) Fraction of Face Value x Interest Rate x a Year = Interest $1,000 x 12% x 1/12 = $10 for 1 month
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Record the Accrual of 3 Months of Interest at the End of March Record the Payment by the Customer at the End of April Accrue 3 months of interest on March 31, 2010 Interest Receivable 30.00 Interest Revenue 30.00 Collect Interest and Note on April 30, 2010 Cash 1,040.00 Notes Receivable
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Unformatted text preview: 1,000.00 Interest Receivable 30.00 Interest Revenue 10.00 Alternative Approach to Recording the April Entries This entry sequence totally replaces the entries on the previous page. This entry sequence ultimately has the same effect on the accounts. Record the Accrual of 3 Months of Interest at the End of March Record the Accrual of 1 More Month of Interest at the End of April Record the Payment by the Customer at the End of April Accrue 3 months of interest on March 31, 2010 (same as previous page) Interest Receivable 30.00 Interest Revenue 30.00 Accrue 1 more month of interest on April 30, 2010 Interest Receivable 10.00 Interest Revenue 10.00 Collect Interest and Note on April 30, 2010 Cash 1,040.00 Notes Receivable 1,000.00 Interest Receivable 40.00...
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Note Receivable and Interest - 1,000.00 Interest Receivable...

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