Chapter-14-Notes-Receivable.ppt

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1、14-1NOTES RECEIVABLECHAPTER 14CHAPTER 1414-2Notes receivableCredit sale:durable goods of high valuePromissory note14-3Promissory NotesAccounts Receivable FormalNotes Receivable A promissory note is an unconditional promise to pay a definite sum of money on demand or at a future date.Promissory note1

2、4-4Promissory NotesMakerThe person who signs the note and thereby promises to pay PayeeThe person to whom payment is to be made 14-5Promissory Notes$1200Wheaton,IllinoisJanuary 5,1999Sixty daysafter date I promise to pay tothe order of Yankee Brothers,Inc.One thousand two hundred-DollarsPayable atWh

3、eaton Mountain BankValue received with interest at per annumNo.Due The Kitchen Taylor42March 6,199912%Dennis Taylor14-6Promissory Notes$1200Wheaton,IllinoisJanuary 5,1999Sixty daysafter date I promise to pay tothe order of Yankee Brothers,Inc.One thousand two hundred-DollarsPayable atWheaton Mountai

4、n BankValue received with interest at per annumNo.Due The Kitchen Taylor42March 6,199912%Dennis TaylorTermPayeeMakerDue DateInterest RatePrincipal14-7Maturity date The maturity date can be calculated according to the following three methods:1.a specific date,such as“November 11th,2017”2.a specific n

5、umber of months after the date of the note,such as“3 months after date”3.a specific number of days after the date of the note,for example,“60 days after date”14-8Determining the maturity date Life of the note expressed in terms of months-the due date is found by counting the months from the date of

6、issue Example：If a note is issued on March 19 that will be due in three months,the note will be due on June 19 in the same year14-9Determining the maturity dateLife of the note is expressed in terms of days-you need to count the days-include the issue date and exclude the maturity date-include the m

7、aturity date and exclude the issue date 14-10Determining the maturity dateExample:a 60-day note dated on September 4,will be due on November 3Including the maturity date and excluding the issue date Days left in September 26 daysDays in October 31 daysDays in November 3 days Total 60 days14-11Determ

8、ining the maturity dateExample:a 60-day note dated on September 4,will be due on November 3Including the issue date and excluding the maturity date Days left in September 27 daysDays in October 31 daysDays in November 2 days Total 60 days14-12Determining the duration of note If the maturity date is

9、stated in a specific number of days from the date of note -the duration is obviouswhen the maturity date is determined on the specific date -you need to count the days-include the issue date and exclude the maturity date-include the maturity date and exclude the issue date 14-13Determining the durat

10、ion of note Example:the note is issued on March 19 and the maturity date is June 19.Including the maturity date and excluding the issue date Days left in March12 daysDays in April30 daysDays in May31 daysDays in June19 daysTotal days 92 days 14-14Determining the duration of note Example:the note is

11、issued on March 19 and the maturity date is June 19.Including the issue date and excluding the maturity date Days left in March13 daysDays in April30 daysDays in May31 daysDays in June18 daysTotal days92 days 14-15Maturity Value of the noteNon-interest noteMaturity valuePrincipal(Face value)Interest

12、-bearing noteMaturity valuePrincipalInterest=+14-16Interest calculation I =P R TInterestPrincipalRateTime14-17Maturity Value of the interest-bearing noteMaturity value=Principal+Interest=Principal+P R T14-18Maturity Value of the interest-bearing note ExampleA 90day,6%,6,000 noteThe maturity value Ma

13、turity value=$6,000+$6,000 6%90/360=$6,000+$90=$6,09014-19DiscountTo discount a note means to take out the interest in advance.Proceeds=Maturity valueDiscountWhen a note is discounted,the amount that the payee receives is called proceeds 14-20DiscountDiscount=Maturity valueInterest rateTimeProceeds=

14、Maturity valueMaturity value Interest Time=Maturity value(1-interest rate time)The number of days remaining until the maturity date 14-21Discount ExampleNow,lets look at an example of calculating proceeds14-22Discount ExampleA 90day note has a maturity value of 3,000,is due in 45 days,and is discoun

15、ted at 7%rate of interest.The proceeds 14-23Discount ExampleProceeds=Maturity value(1-interest rate time)=$3,000 (1 7%45/360)=$3,000 99.125%=$2,973.7514-24ExerciseA 6,000,90-day note bearing 9%rate of interest,is discounted at 10%on the date 20 days before the maturity date.The proceeds The maturity

16、 value Discount14-25ExerciseMaturity value=Principal+Interest=$6,000+$6,000 9%90/360=$6,135Discount=Maturity valueDiscount rateTime=$6,135 10%30/360=$34.08Proceeds=Maturity valueDiscount=$6,135$34.08=$6,100.9214-26ExerciseAssume that a$6,000,9%,90-day note is received from a customer on August 1st.T

17、he entry?August 1st Notes Receivable$6,000 Revenues from sales$6,000 14-27ExerciseWhen the note including interest is collected 90 days later The entry?October 30th Cash$6,135 Notes Receivable$6,000 Interest Income$13514-28ExerciseIf the note is dishonored,the payee or holder of the note will transf

18、er the notes receivable and interest income to accounts receivable.The entry?October 30th Accounts Receivable$6,135 Notes Receivable$6,000 Interest Income$135 14-29ExerciseIf the company discounts the note on October 10and the discount rate is 10%Maturity value=$6,000+$135=$6,135Discount=$6,135 10%20/360=$34.08Proceeds=$6,135-$34.08=$6,100.92 14-30ExerciseThe entry?Interest Income$100.92 Notes Receivable$6,000September 30th Cash$6,100.9214-31WE ARE SAILING RIGHT ALONG!