Kế toán, kiểm toán - Chapter 16: Notes payable and notes receivable

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Notes Payable and Notes Receivable  Section 1: Accounting for Notes Payable Chapter16Section ObjectivesDetermine whether an instrument meets all the requirements of negotiability. Calculate the interest on a note.Determine the maturity date of a note.Record routine notes payable transactions.5. Record discounted notes payable transactions.UCC Requirements for Negotiability Must be in writing and signed by the maker. Must contain an unconditional promise to pay a  definite amount of money. Must be payable either on demand or at a future  time that is fixed or that can be determined. Must be payable to the order of a specific  person or to the bearer. Must clearly name or identify the drawee if  addressed to a drawee.Determine whether an instrument meets all the requirements for negotiabilityObjective 1Interest = Principal x Rate x TimeAmount being borrowed (also called face value)Indicated in fractions of a yearCalculating Interest on a notePrincipal x Rate x Time = Interest $4,000 x 0.08 x (90/360) = $80 Determine the number of days remaining in the  month of issue. Determine the number of days in each full month of  the note. Determine the number of days in the last month of  the note. Add the days together to confirm that they equal the  period of the note.Calculating the Maturity Dateof a NotePrincipal + Interest = Maturity Value $4,000 + $80 = $4,080Notes Payable Transactions2013May. 18 Store Equipment 4,000.00 Notes Payable—Trade 4,000.00 Issued note payable to Unfinished Furniture, Inc., for purchase of store equipment Record the issuance of a note payableRecord routine notes payable transactionsObjective 42013Aug 16 Notes Payable—Trade 4,000.00 Interest Expense 80.00 Cash 4,080.00 Payment of May 18 note to Unfinished Furniture, Inc., Record payment of the note payable and interest: Interest rate is 8%, term of note is 90 days.Notes Payable TransactionsDiscounted Notes PayableFace Amount – Discount = Proceeds $10,000 – $100 = $9,900Example: If a $10,000, 6% 60-day note is discounted with the bank, then the borrower would receive only $9,900.$10,000 x 6% x 60/360 = $100 interestRecord discounted notes payable transactionsObjective 5Recording a Discounted Note Payable2013June 1 Cash 9,900.00 Interest Expense 100.00 Notes Payable—Bank 10,000.00 To record note payable issued at a discount Record issuance of discounted note:Notice that Interest Expense is debited for the $100 interest paid in advanceRecording the payment of a Discounted Note2013July 31 Note Payable 10,000.00 Cash 10,000.00 To record the payment of note payable issued at a discount Record payment at maturity of a discounted note: Reporting Notes Payable and Interest Expense Notes Payable Current liabilities if due within one year. Long-term liabilities if due in more than one year. Interest Expense Classified as a nonoperating expense. Listed in the Other Income and Expenses section of  the income statement. Notes Payable and Notes Receivable  Section 2: Accounting for Notes ReceivableChapter16Section Objectives6. Record routine notes receivable transactions.7. Compute the proceeds from a discounted note receivable, and record transactions related to discounting of notes receivable. 8. Understand how to use bank drafts and trade acceptances and how to record transactions related to those instruments.A note receivable is an asset representing a written promise by the debtor to pay the creditor a specified amount at a specified future date.ANSWER:QUESTION:What is a note receivable?Record routine notes receivable transactionsObjective 6Notes Receivable Transactions2013June 12 Notes Receivable 1,200.00 Accounts Receivable/John Woods 1,200.00 To record 60-day note receivable to replace an overdue account receivable. Record the receipt of an interest bearing note receivableNotes Receivable Transactions2013Aug 11 Cash 1,220.00 Note Receivable 1,200.00 Interest Income 20.00 Collection of John Woods’s note plus (interest= 1,200 x 10% x 60/360 days) Record the receipt of cash from a customer in payment of their noteNote ReceivableNot Collected at MaturityIf a note is not paid and not renewed, it is dishonored2013Aug 11 Accounts Rec./John Woods 1,220.00 Notes Receivable 1,200.00 Interest Income 20.00 To charge back Woods’s dishonored note plus interest to maturityInterest income is recognized and added to the account receivable Notes Receivable Current asset if due within one year. Long-term asset if due in more than one year. Interest Income Classified as non-operating income. Listed in the Other Income and Expenses  section of the income statement.Reporting Notes Receivable and Interest IncomeDraft: a written order that requires one party to pay a stated sum of money to another party Check Bank Draft A bank orders another bank to pay the stated amount to a specific party. It is more readily accepted than a business or personal  check. Commercial Draft One party orders another party to pay a specified amount  on a specified date. It is used for special shipment and collection situations.Drafts and AcceptancesInternal Control of Notes Payable, Notes Receivables, and Drafts:Limit the number of people who can sign notes for the firm.Record all notes payable immediately.Handle drafts as carefully as checks.Review all past due notes promptly and take necessary steps, including legal action to insure payment.