receivables
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Receivables. Notes Receivable and Interest Revenue. Receivables. Premise :. Receivables. Premise : When you extend credit to customers…. Receivables. Premise : When you extend credit to customers… you know some customers won’t pay. Receivables. Premise : - PowerPoint PPT PresentationTRANSCRIPT
ReceivablesReceivables
Notes Receivableand Interest Revenue
ReceivablesReceivables
Premise:
ReceivablesReceivables
Premise:
When you extend credit to customers…
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
Solutions:
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
Solutions:
I. Notes Receivable and Interest
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
Solutions:
I. Notes Receivable and Interest
II. Uncollectible Accounts
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
Solutions:
I. Notes Receivable and Interest
II. Uncollectible Accounts Lecture
ReceivablesReceivables
Premise:
When you extend credit to customers…
you know some customers won’t pay.
Solutions:
I. Notes Receivable and Interest
II. Uncollectible Accounts
Today
Why Notes instead of Accounts Receivable?
charge (earn) intereststronger legal claimmore liquid -- may be converted to
cash selling A/R called “factoring” selling Notes Receivable called
“discounting”
Calculating Interest
rate is an annual ratetime expressed as a portion of year
government uses 365 many banks use 360 use 360 in homework / class
P x R x T
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = ???
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = ???
$844. = $8.44
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = $8.44
You try . . .
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = $8.44
You try . . .
6% for 30 days =
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = $8.44
You try . . .
6% for 30 days = $4.22
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = $8.44You try . . .
6% for 30 days = $4.22
12% for 60 days =
Short-cut “6% - 60 day” Method
$844. x 6% x 60 / 360 = ???
$844. = $8.44You try . . .
6% for 30 days = $4.22
12% for 60 days = $16.88
Determining the (Exact) Due Date
• Learn the number of days in each month
• poem method
• knuckle method
• counting days if term of note
• stated in days
• stated in months
Example of Counting Days
A 60-day note dated August 17 is due ________ .
31 - 17
14 + 30
44 + ??
60
The note is due October 16.
Due Date When Stated in Months
RULE: “same day of the month”
Examples of Counting Months
A two-month note dated August 17 is due ______ .
October 17
Due Date When Stated in Months
RULE: “same day of the month”
EXCEPTION: how to deal with EOM
“last day of month”
Examples of Counting Months
A two-month note dated August 17 is due ______ .
October 17
A three-month note dated Nov. 30 is due ______ .
February 28
A three-month note dated April 30 is due ______ .
July 30
Exercise E9-8page 388
8/16 Sold merchandise to Prentice Berge on account, $4,000.
Date Account Title Ref Debit Credit
4,000Sales
Accounts Receivable - PB 4,00016
Should also record reduction in inventory.
Exercise E9-8page 388
Date Account Title Ref Debit Credit
Notes Receivable 18,000
18,000Cash
1
11/1 Loaned $18,000 cash to Sally Morgan on a 1-year, 10% note.
What about the interest?
What about the discount?Ever been lost ... … at DisneyWorld? … in a hospital? … in an office building?
11/1
10/31
You are here!
Inte
rest
interest
Exercise E9-8page 388
Date Account Title Ref Debit Credit
Notes Receivable 6,000
6,000Sales
1
12/11Sold goods to Sue Adams, Inc., receiving a $6,000, 90-day, 12% note.
Should also record reduction in inventory.
Exercise E9-8page 388
8/16 Sold merchandise to Prentice Berge on account, $4,000.
Date Account Title Ref Debit Credit
Accounts Receivable - PB 4,000
4,000Sales
16
12/16Received a $4,000, 6-month, 12% note on account from Prentice Berge.
Date Account Title Ref Debit Credit
Accounts Receivable - PB
4,000
4,000
Notes Receivable16
Exercise E9-8page 388
12/31Accrued interest revenue on all notes receivable.
Date Account Title Ref Debit Credit
Interest Receivable earned
earnedInterest Revenue
31
How much?
Accrued Interest
11/1 $18,000, one year, 10%
12/11 $6,000, 90 days, 12%
12/16 $4,000, 6 months, 12%
Accrued Interest
11/1
12/11
12/16
12/31
Accrued Interest
11/1
12/11
12/16
12/31
$18,000 x 10% x ??
$18,000 x 10% x ??
$6,000 x 12% x ??
$6,000 x 12% x ??
$4,000 x 12% x ??
$4,000 x 12% x ??
Accrued Interest
11/1
12/11
12/16
12/31
2 / 12
2 / 12
31 - 11 = 20
31 - 11 = 20
½ month
½ month
Exercise E9-8page 388
12/31Accrued interest revenue on all notes receivable.
Date Account Title Ref Debit Credit
Interest Receivable earned
earnedInterest Revenue
31
How much?
Exercise E9-8page 388
12/31Accrued interest revenue on all notes receivable.
Date Account Title Ref Debit Credit
Interest Receivable $360$360Interest Revenue
31
$360
ReceivablesReceivables