Notes Payable - Notes Payable Companies record obligations...

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Notes Payable Companies record obligations in the form of written notes as notes payable . They often use notes payable instead of accounts payable because notes payable give the lender written documentation of the obligation in case legal remedies are needed to collect the debt. Companies frequently issue notes payable to meet short-term financing needs. Notes payable usually require the borrower to pay interest. Notes are issued for varying periods of time. Those due for payment within one year of the balance sheet date are usually classified as current liabilities. Most notes are interest-bearing. To illustrate the accounting for notes payable, assume that First National Bank agrees to lend $100,000 on September 1, 2010, if Cole Williams Co. signs a $100,000, 12%, four-month note maturing on January 1. When a company issues an interest-bearing note, the amount of assets it receives generally equals the note's face value. Cole Williams Co. therefore will receive $100,000 cash and will make the following journal entry. (To record issuance of 12%, 4-month note to First National
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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Notes Payable - Notes Payable Companies record obligations...

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