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ACCOUNTING II
Chapter 20
LESSON 20-1
PROMISSORY NOTE:
§ Purpose –
§ 2 types:
1. Notes Payable -
2. Notes Receivable -
§ Creditor –
Parts of a Note:
INTEREST ON PROMISSORY NOTES:
Interest for one year:
Interest for fraction of a year:
Maturity value:
MATURITY DATE:
1.
2.
3.
4.
EXTRA PRACTICE PROBLEMS:
Interest, Maturity Date & Maturity Value
Directions: Determine the interest and the maturity value of the following notes. Show your calculations and round to the nearest cent.
Date / Principal / Interest Rate / Term(days) / Interest / Maturity Value / Maturity
Date
Jan. 14 / $1,500 / 12% / 90
March 3 / $4,000 / 9.5% / 60
May 7 / $25,000 / 18% / 180
Oct. 30 / $15,000 / 10% / 120
LESSON 20-2
NOTES PAYABLE (NP):
§ Classification:
§ Interest Expense –
§ Signing a NP – journalized in the ______
o Why? –
o Debit –
o Credit –
§ Paying a NP – journalized in the ______
o Debit –
o Credit –
§ Signing for an extension of time – journalized in the ______
o Debit –
o Credit -
Examples:
LESSON 20-3
NOTES RECEIVABLE:
§ Def. –
§ Classification –
§ Purpose –
§ When an extension is granted –
§ Receipt of NR -
o Debit –
o Credit –
§ Receipt of payment from Note Receivable –
o Debit -
o Credit –
§ Dishonored Notes Receivable –
§ Journalized –
o Debit –
o Credit –