Notes Receivable & Other Recievable Issues – Cheat Sheet

Notes Receivable & Other Recievable Issues – Cheat Sheet

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Notes Receivable – Cheat Sheet Issued at Face Value o Example: ABC lends XYZ $5,000 in exchange for a $5,000 three-year note bearing interest at 10 percent. (The issuance at face value implies that the market rate for this note is also 10 percent) o Journal Entry at Issuance: Notes Receivable 5,000 Cash 5,000 o Journal Entry at End of Year: Cash (or Int Rec) 500 Interest Rev 500 o Journal Entry at Disposition: Cash 5,000 Note Receivable 5,000 NOT Issued at Face Value – Zero Interest Bearing o Example: ABC receives a three-year $10,000 zero-interest-bearing note that has a present value of 7,721.80. (The $7,721.80 present value implies a 9% return. This is the implicit rate of return) o Journal Entry at Issuance: Notes Receivable 10,000 Discount on Notes Receivable 2,278.20 Cash 7,721.80 o Journal Entry at End of Year 1: Discount on Notes Receivable 694.96* Interest Rev 694.96* *(7,721.80 x .09) o Journal Entry at End of Year 2: Discount on Notes Receivable 757.51** Interest Rev
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This note was uploaded on 11/15/2011 for the course ACC 321 taught by Professor Staff during the Fall '08 term at Miami University.

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Notes Receivable & Other Recievable Issues – Cheat Sheet

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