14
Notes Receivable and
Notes Payable
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. A company may use Notes Payable instead of Accounts Payable:
3. Note expressed in months does not need a table or calendar. Months are
counted regardless of number of days in each month.
5. The information on the note acts as the subsidiary ledger. The file of notes
has all the information needed.
7. Notes Payable is transferred back to Accounts Payable. At this time, the
8. A. Find maturity value of note
9. Contingent liability is the potential liability of one who discounts a note if the
maker of note defaults at maturity date.
11. Debit is the normal balance of the Discount on Notes Payable account. It is a
contra liability.
12.
14. The question in this case is whether Kevin should tell his girlfriend
confidential information about his friends. It is extremely unethical for Kevin
SOLUTIONS TO CONCEPT CHECKS
2. a.
b.
3.
a.
Merchandise Inventory
7,400
Accounts Payable, Franklin Co.
7,400
b.
Accounts Payable, Franklin Co.
7,400
Notes Payable
7,400
c.
Notes Payable
7,400
Interest Expense
Cash
7,500
5. a. Maturity value is $6,120.
6.
Cash
6,001.00
7.
Accounts Receivable, Pearl Co.
6,130
8.
Cash
Asset
Debit
Increase $57,590
Contra-Liability
Debit
Notes Payable
Liability
Increase $58,000
9.
Interest Expense
50
SOLUTIONS TO SET A EXERCISES
14A-1
14A-2
(a) The note issued on May 17, 201X, with terms of 30 days will mature on
14A-3
(a)
Maturity Date
June 16, 201X
47
EXERCISES (CONTINUED)
14A-4
(a)
Cash
9,048
Interest Income
48
Notes Receivable
Cash
Dishonored Note Receivable
14A–5.
Cash
33,300
Discount on Notes Payable
SOLUTIONS TO SET B EXERCISES
SET B
14B-1. (a) $840
14B-2. (a) The note issued on January 17, 201X, with terms of 30 days will
mature on February 16, 201X.
14B-3.
(a)
Maturity Date
February 16, 201X
47
Note Issues
January 17, 201X
–17
(b)
Maturity Date
Note Issued
Note Issued
Length of Time
90
14B-4.
(a)
Cash
14,112
112
112
14B-4.
Cash
19,950
Discount on Notes Payable
SOLUTIONS TO SET A PROBLEMS
PROBLEM 14A-1 GENERAL JOURNAL PAGE 1
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Buyer-Rover Co.
Jun.
11
Merchandise Inventory
7
5
0
0
00
7
5
0
0
00
Bought on Account
Jul.
11
Accounts Payable, Lincoln Co.
3
0
0
0
00
3
0
0
0
00
Oct.
9
Notes Payable
3
0
0
0
00
Interest Expense
6
0
00
3
0
6
0
00
9
Notes Payable
3
0
0
0
00
Interest Expense
6
0
00
Accounts Payable, Lincoln Co.
3
0
6
0
00
Dishonored note to Lincoln
15
Accounts Payable, Lincoln Co.
3
0
6
0
00
Cash
3
0
6
0
00
Jun.
11
Accounts Receivable, Rover Co.
7
5
0
0
00
7
5
0
0
00
Sold on Account
Cost of Goods Sold
0
0
0
Jul.
11
Notes Receivable
3
0
0
0
00
3
0
0
0
00
Transferred to Notes Receivable
Oct.
9
Cash
3
0
6
0
00
6
0
00
3
0
0
0
00
Collected on note plus interest
PROBLEM 14A-1 (CONCLUDED)
GENERAL JOURNAL
PAGE 2
Oct.
Accounts Receivable, Rover Co.
3
6
6
0
3
0
0
0
Cash
3
6
3
0
6
0
PROBLEM 14A-2
JASON CO.
GENERAL JOURNAL
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Cash
PROBLEM 14A-3
JACKSON CO.
GENERAL JOURNAL
PAGE 2
Jun.
18
Cash
41
7
1
0
Discount on Notes Payable
1
2
9
0
00
Notes Payable
43
0
0
0
00
Interest Expense
Date
Sep.
16
1
2
9
0
00
Notes Payable
43
0
0
0
00
Discount on Notes Payable
1
2
9
0
00
Cash
43
0
0
0
00
Cash
39
2
0
0
00
Discount on Notes Payable
8
0
00
Notes Payable
40
0
0
0
00
Dec.
31
Interest Expense
5
9
0
00
PROBLEM 14A-4
CARNEY COMPANY
GENERAL JOURNAL
PAGE 2
Apr.
18
Notes Receivable
14
0
0
0
00
Accounts Receivable, Jake Crabill
14
0
0
0
00
Transferred to Notes Receivable
9
Allowance for Doubtful Accounts
6
1
0
00
Accounts Receivable, Francis Dema
6
1
0
00
Wrote off Account
Jul.
17
Cash
14
3
5
0
00
Interest Income
3
5
0
00
Notes Receivable
0
0
0
00
Date
Jake Crabill paid note
Nov.
11
Accounts PayabIe, Flower Co.
18
0
0
0
00
Notes Payable
18
0
0
0
00
Transferred to Notes Payable
15
Accounts Receivable, Francis Dema
6
1
0
00
Allowance for Doubtful Accounts
6
1
0
00
Reinstate written off account
15
Cash
6
1
0
00
Accounts Receivable, Francis Dema
6
1
0
00
Collected from customer
Dec.
3
Cash
9
1
0
00
Discount on Notes Payable
9
0
00
Notes Payable
6
0
0
0
00
Borrowed at a discount
5
Notes Receivable
0
0
0
00
Accounts Receivable, Thomas Haden
2
0
0
0
00
Transferred to Notes Receivable
PROBLEM 14A-4 (CONCLUDED)
CARNEY COMPANY
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Dec.
11
Notes Payable
18
0
0
0
00
Interest Expense
7
5
00
18
7
5
Cash
2
2
Dec.
Interest Expense
Interest Receivable
SOLUTIONS TO SET B PROBLEMS
PROBLEM 14B-1
GENERAL JOURNAL
PAGE 1
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Buyer – Ramsey Co.
11
Merchandise Inventory
8
0
0
0
00
Accounts Payable, Lyons Co.
8
0
0
0
00
Bought on Account
July
11
Accounts Payable, Lyons Co.
3
5
0
0
00
Notes Payable
3
5
0
0
00
Transferred to Notes Payable
Oct.
9
Notes Payable
3
5
0
0
00
Interest Expense
3
5
00
Cash
3
5
5
00
5
Paid off note plus interest
9
Notes Payable
3
5
0
0
00
Interest Expense
3
5
00
Accounts Payable, Lyons Co.
3
5
3
6
00
Dishonored note to Lyons Co.
Accounts Payable, Lyons Co.
3
5
3
5
00
Cash
3
5
3
5
00
Paid amount due to Lyons
Accounts Receivable, Ramsey Co.
8
0
0
0
00
Sales
8
0
0
0
00
Sold on Account
11
Cost of Goods Sold
7
0
0
0
00
Merchandise Inventory
7
0
0
0
00
Cost of merchandise sold
July
11
Notes Receivable
3
5
0
0
00
Accounts Receivable, Ramsey Co.
3
5
0
0
00
Transferred to Notes Receivable
Oct.
9
Cash
3
5
3
5
00
Interest Income
3
5
00
Notes Receivable
3
5
0
0
00
PROBLEM 14B-1 (CONCLUDED)
GENERAL JOURNAL
PAGE 2
3
5
3
0
0
15
Cash
3
5
3
5
3
3
5
Date
PROBLEM 14B-2
a.
Maturity Value of the note is $26,325.
d.
Proceeds are $26,091.
LAKE CO.
GENERAL JOURNAL
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Cash
26
9
1
9
1
26
0
0
0
PROBLEM 14B-3
JONES CO.
GENERAL JOURNAL
PAGE 2
Date
20X1
Account Titles and Description
PR
Dr.
Cr.
June
18
Cash
47
0
4
0
00
Discount on Notes Payable
9
6
0
00
49
0
0
0
00
Sep.
16
Interest Expense
9
6
0
00
49
0
0
0
00
1
9
6
0
00
Nov.
Cash
4
7
5
00
Discount on Notes Payable
5
2
5
00
10
0
0
0
00
Dec.
31
Interest Expense
1
4
7
50
1
4
7
50
PROBLEM 14B-4
FALCON COMPANY
GENERAL JOURNAL
PAGE 2
Apr.
18
Notes Receivable
11
0
0
0
00
Accounts Receivable, Cathy Bora
11
0
0
0
00
Transferred to Notes Receivable
Allowance for Doubtful Accounts
6
4
0
00
Accounts Receivable, April Deacy
6
4
0
00
Wrote off Account
17
Cash
11
1
1
0
00
Interest Income
1
1
0
00
Notes Receivable
11
0
0
0
00
Date
Cathy Bora paid note
Nov.
11
Accounts Payable, Quiet Co.
21
0
0
0
00
Notes Payable
21
0
0
0
00
Transferred to Notes Payable
15
Accounts Receivable, April Deacy
6
4
0
00
Allowance for Doubtful Accounts
6
4
0
00
Reinstate written off account
15
Cash
6
4
0
00
Accounts Receivable, April Deacy
6
4
0
00
Collected from customer
Dec.
Cash
5
9
1
0
00
Discount on Notes Payable
9
0
00
Notes Payable
6
0
0
0
00
Borrowed at a discount
Notes Receivable
5
0
0
0
00
Accounts Receivable, Vickey Jacob
5
0
0
0
00
Transferred to Notes Receivable
PROBLEM 14B-4 (CONCLUDED)
FALCON COMPANY
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Dec.
11
Notes Payable
21
0
0
0
00
Interest Expense
1
4
0
00
21
4
0
00
Paid Quiet Co.
16
Notes Receivable
15
0
0
0
00
15
0
0
0
00
Transferred to Notes Receivable
23
Cash
0
2
2
50
2
2
50
5
0
0
0
00
Discounted Vickey Jacob Note
Dec.
31
Interest Expense
4
2
00
Interest Receivable
FINANCIAL REPORT PROBLEM SOLUTION—2016 Amazon’s Annual Report
2016 Interest Income $100 million
KEEPING IT REAL—Suarez Computer Center Solution
Bank of America Note
Calculation of Due Date
April 15 Days
Bank One Note
Calculation of Due Date
April 20 Days
Capital One Bank Note
Calculation of Due Date
April 25 Days