Unformatted text preview: receivable.
To the Maker, the promissory note is a note payable.
Illustration 8-9 Chapter
8-21 Notes Receivable
Determining the Maturity Date
Note expressed in terms of Months
Days Computing Interest Chapter
8-22 Illustration 8-10 SO 4 Compute the interest on notes receivable. Notes Receivable
When counting days, omit the date the note is issued, but include the due date.
Illustration 8-11 Chapter
8-23 SO 4 Compute the interest on notes receivable. Notes Receivable
Recognizing Notes Receivable
Illustration: Assuming that Brent Company wrote a $1,000, two
month, 8% promissory note dated May 1, to settle an open account. Prepare entry would Wilma Company makes for the receipt of the note.
May 1 Chapter
8-24 Notes receivable Accounts receivable 1,000
1,000 SO 4 Compute the interest on notes receivable. Notes Receivable
Valuing Notes Receivable
Like accounts receivable, companies report shortterm notes receivable at their cash (net) realizable value. Estimation of cash realizable value and bad debts expense are done similarly to accounts receivable.
Allowance for Doubtful Accounts is used. Chapter
8-25 SO 4 Compute the interest on notes receivable. Notes Receivable
Disposing of Notes Receivable
1. Notes may be held to their maturity date.
2. Maker may default and payee must make an adjustment to the account. 3. Holder speeds up conversion to cash by selling the note receivable. Chapter
8-26 SO 5 Describe the entri...
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