Notes Receivable/Notes Payable

Question 1

Notes receivables/payables due in one year are recorded at

Answer 1

MATURITY VALUE

Question 2

Notes receivables/payables due more than one year are recorded at

Answer 2

PRESENT VALUES

Question 3

Discounting of NR

Answer 3

sale of NR to a bank

Question 4

JE - Notes received solely for cash

Answer 4

Notes Receivable

Cash

Question 5

JE - Notes received for goods or services

at reasonable rate, due within 1 year

Answer 5

Notes Receivable
Asset
Gain on Sale

No premium or discount
record asset at BV
record gain or loss

Question 6

JE - Non interest bearing notes receivable
no state interest rate or unreasonable interest
FMV of note or of goods given

Answer 6

1. Compute the discount on NR:

Fair value of asset or note
– Face value of note
= Discount on NR

Notes Receivable (at face)
Discount on NR
Asset (at BV)
Gain on sale

Face
– FV of asset/or note = Discount

FV of asset
– BV of asset = Gain on sale

Question 7

JE - Notes receivable
FV of note and goods not given
reasonable interest for the kind of note is given

Answer 7

Compute present value of note using the
IMPUTED INTEREST

Face of note
– Present value
== Discount on NR

Notes receivable
Discount on NR
Asset - at BV
Gain on sale

Face of note
minus PV = discount on NR

Present value of note
minus BV of asset
= Gain on sale

Question 8

Discounting of notes receivable

Compute maturity value of note

Answer 8

Face plus accrued interest

Question 9

Discounting of notes receivable

Compute proceeds of note

Answer 9

Maturity value
minus Discount (face X discount rate
x time remaining)
= Proceeds of note

Question 10

JE - Discounting of notes receivable

When note is sold to a bank

Answer 10

Cash (proceeds)
Loss on discounting (plug)
Notes receivable