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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 10-1LESSON 10-1
Notes Receivable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
TERMS REVIEWTERMS REVIEW
notes receivable – promissory notes that business receives from customers
dishonored note – note that is not paid when due
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
ISSUING A NOTE RECEIVABLE FOR AN ISSUING A NOTE RECEIVABLE FOR AN ACCOUNT RECEIVABLEACCOUNT RECEIVABLE
April 3. Accepted a 30-day, 12% note from Duane Jansen for an extension of time on his account, $300.00. Note Receivable No. 11.
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
ISSUING A NOTE FOR A SALEISSUING A NOTE FOR A SALE
April 4. Accepted a 90-day, 12% note from Mark Carver for the sale of an appliance, $450.00. Note Receivable No. 12.
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
1. Calculate interest income.
2. Record note.
3. Record interest income.
4. Enter total cash received.
RECEIVING CASH FOR A RECEIVING CASH FOR A NOTE RECEIVABLENOTE RECEIVABLE page 292
May 3. Received cash for the maturity value of Note Receivable No. 11: principal, $300.00, plus interest, $3.00; total, $303.00. Receipt No. 452.
PrincipalInterest
RateFraction of Year
= Interest× ×
$300.00 12%30
360 = $3.00× ×
4422
33
11
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
1. Calculate interest income.
2. Record the debit for the total amount receivable.
3. Record a credit for the note principal.
4. Record a credit for the interest income.
RECORDING A DISHONORED RECORDING A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 293
June 1. Ruth Javinsky dishonored Note Receivable No. 8, a 30-day, 12% note, maturity value due today; principal, $250.00; interest, $2.50; total, $252.50. Memorandum No. 120.
Principal Interest Rate Fraction of Year = Interest× ×
$250.00 12%30360 = $2.50× ×
44
22
33
11
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
RECEIVING CASH FOR A DISHONORED RECEIVING CASH FOR A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 294
MaturityValue
InterestRate
Fractionof Year
=AdditionalInterest
× ×
1. Calculate number of days from maturity date to date of payment.2. Calculate additional interest income.
Time Number of DaysJune 1 through 30 29 (30 – 1 = 29)July 31August 31 September 1 through 30 30Total number of days 121 days 11
$252.50 12%121360
= $10.18× × 22
September 30. Received cash from Ruth Javinsky for dishonored Note Receivable No. 8: maturity value, $252.50, plus additional interest, $10.18; total, $262.68. Receipt No. 201.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-1
3. Record payment of the account receivable.
4. Record additional interest income.
5. Enter total cash received.
RECEIVING CASH FOR A DISHONORED RECEIVING CASH FOR A DISHONORED NOTE RECEIVABLENOTE RECEIVABLE page 294
3344
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 10-2LESSON 10-2
Unearned and Accrued Revenue
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-2
TERMS REVIEWTERMS REVIEW
unearned revenue – revenue that you’ve received in one fiscal period but won’t be earned until the next fiscal period For example – Prepaid Rental Income
accrued revenue – Revenue that you’ve earned but will not receive until a later fiscal period For example – Interest income on a note receivable
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-2
1. Debit the revenue account.
2. Credit the liability account.
ADJUSTING ENTRY FOR UNEARNED REVENUE ADJUSTING ENTRY FOR UNEARNED REVENUE INITIALLY RECORDED AS A REVENUEINITIALLY RECORDED AS A REVENUE
11
22
page 297
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-2
1. Debit the liability account.
2. Credit the revenue account.
REVERSING ENTRY FOR UNEARNED REVENUE REVERSING ENTRY FOR UNEARNED REVENUE INITIALLY RECORDED AS A REVENUEINITIALLY RECORDED AS A REVENUE
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page 298
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-2
PrincipalInterest
RateFraction of Year
= Accrued Interest Income× ×Note
$500.00 10%30
360 = $4.17× ×12
$700.00 10%15
360 = 2.92× ×13
1. Calculate interest earned on the notes.
2. Record entry to accrue interest income.
ADJUSTING ENTRY FOR ACCRUED ADJUSTING ENTRY FOR ACCRUED INTEREST INCOMEINTEREST INCOME page 299
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22
Total accrued interest income, December 31 . . . . $7.09
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 10-2
REVERSING ENTRY FOR REVERSING ENTRY FOR ACCRUED INTEREST INCOMEACCRUED INTEREST INCOME page 300
