Lesson Plan 7. 7 - Notes and Interest
Course Title – Accounting I
Session Title – Notes and Interest
Lesson Purpose – Demonstrate skill in calculating interest and discounts on
interest-bearing notes, non-interest bearing notes, and discounted notes as well
as journalizing notes transactions.
Behavioral Objectives



Define terms related to notes and interest.
Calculate interest and maturity dates for notes.
Analyze and journalize transactions for notes payable and notes
receivable.
Preparation
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
120.42.C
4.e. calculate and record notes
payable and notes receivable;
4.g. calculate interest due and
payable and journalize transactions
involving notes payable and
receivable;
7.a. follow oral and written
instructions;
7.b. develop time management skills
by setting priorities for completing
work as scheduled.
7.c. make decisions using
appropriate accounting concepts;
7.e. perform accounting procedures
using manual and automated
methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
130.166.C
6.c. – post to an accounts payable
subsidiary ledger;
6.d. – process invoices for payment
and accounts payable;
6.e. – prepare an accounts payable
schedule;
7.d. – post to an accounts receivable
subsidiary ledger;
7.h. – prepare an accounts receivable
schedule
TAKS Correlation:
READING
Objective 1: The student will demonstrate a basic understanding of culturally
diverse written texts.
Lesson Plan 7.7 – Notes and Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
WRITING
Objective 5: The student will produce a piece of writing that demonstrates a
command of the conventions of spelling, capitalization, punctuation, grammar,
usage, and sentence structure.
Objective 6: The student will demonstrate the ability to revise and proofread to
improve the clarity and effectiveness of a piece of writing.
MATH
Objective 10: The student will demonstrate an understanding of the
mathematical processes and tools used in problem solving.
Materials, Equipment and Resources:






Textbook
Accounting Software
Journal Input Forms
Internet
Spreadsheet Software
Multimedia Presentation Software
Teaching Strategies:



Observation
Verbal Drills
Demonstration
Lesson Content:
Instruction on calculating interest, discounts and maturity dates on notes and
demonstrations on analyzing and journalizing transactions relating to notes
Assessment:


Observation
Graded Assignments
Lesson Plan 7.7 – Notes and Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Additional Resources:
Textbooks:
Guerrieri, Donald J., Haber, Hoyt, Turner. Glencoe Accounting RealWorld Applications and Connections. Glencoe McGraw-Hill, 2000.
ISBN/ISSN 0-02-815004-X.
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 Accounting
Multicolumn Journal Anniversary Edition, 1st Year Course. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43524-0
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 General
Journal Accounting Anniversary Edition, 7th Edition. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43529-1.
Websites:
Notes Receivable http://digitalboy.freeservers.com/acc08.html.
simple interest. Learning Wave Online, 1999. .
http://www.learningwave.com/lwonline/percent/interest.html.
Lesson Plan 7.7 – Notes and Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.7.1 – Identifying Terms
Course Title – Accounting I
Session Title –Notes and Interest
Activity Purpose - Demonstrate skill in identifying terms related to notes and
interest.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
WRITING
Objective 5: The student will produce a piece of writing that demonstrates a
command of the conventions of spelling, capitalization, punctuation, grammar, usage,
and sentence structure.
Objective 6: The student will demonstrate the ability to revise and proofread to
improve the clarity and effectiveness of a piece of writing.
Materials, Equipment and Resources:




Textbook
Internet
Poster Board
Markers
Teaching Strategies:


Observation
Verbal Drills
Activity 7.7.1 – Identifying Terms
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Have students break into teams of 3 or 4 students. Ask them to draw an
image of a promissory note on poster board and use markers to identify
these parts. Have students put the definition of promissory note at the top of
the poster.
date of a note
principal of a note
maker of a note
time of a note
interest rate of a note
number of a note
payee of a note
maturity date of a note
2. Have students define these words and write a complete sentence using the
word or phrase appropriately.
interest
maturity value
current liabilities
discounted note
interest income
interest-bearing note
creditor
interest expense
proceeds
dishonored note
non-interest-bearing note
notes payable
bank discount
notes receivable
face value
Assessment:


Observation
Graded Assignment
Quality Feature
Effectively participates as a member of the team
Poster accurately demonstrates each term identifying that part of the
promissory note
Definition for promissory note correct
Definitions of other terms correct
Sentences appropriate for the definition and without error in
grammar or spelling
Completes in a timely manner
Activity 7.7.1 – Identifying Terms
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.7.2 - Calculating Interest
Course Title – Accounting I
Session Title –Notes and Interest
Activity Purpose - Demonstrate skill in calculating simple interest on a promissory
note.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.e. calculate and record notes payable
and notes receivable;
4.f. open and replenish a petty cash
fund and journalize transactions;
4.g. calculate interest due and payable
and journalize transactions involving
notes payable and receivable;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
4.c. – journalize and post entries to
establish and replenish petty cash;
6.c. – post to an accounts payable
subsidiary ledger;
6.e. – prepare an accounts payable
schedule;
7.d. – post to an accounts receivable
subsidiary ledger;
7.h. – prepare an accounts receivable
schedule
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Spreadsheet Software
Teaching Strategies:


Observation
Verbal Drills
Activity 7.7.2 – Calculating Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1

Demonstration
Activity Outline:
1. Discuss and demonstrate the formula for simple interest. Review the terms
associated with the formula. You might want to teach them to use the
spreadsheet as their calculator.
Principal
Rate
Time
Interest
Maturity Value
(Amount
Borrowed)
(Stated as a
percent)
(Must be
stated in
years)
(prt=i)
(Principal + Interest)
$5,000
10%
1 year
$500
$5,500
5000*10%*1 = 500
5,000+50=5500
$5,000
10%
6 months
$250
5000+250=5250
5000*10%*6/12 = 250
$5000
10%
30 days
$41.67
5000+41.67=5041.67
5000*10%*30/360 = 41.67
2. Have students calculate the simple interest. Check for answers when they
have finished.
Amount
Principal Rate
Time
of
Interest
1.
$20,000 12%
2 years
2.
$45,000 13% 10 years
3.
$7,000 10%
2 years
4.
$450
5%
60 days
5.
$850 4.5%
30 days
6.
$2,000
6% 6 months
7.
$3,100
7%
1 year
8.
$100,000 14%
2 years
9.
$300
3%
45 days
10.
$900
9%
90 days
3. Using a calendar, have students calculate maturity dates on notes. Do the
first few with them and check for correct answers when they have finished.
Date Note
Length of
Maturity
Issued
Note
Date
January 1, 2004
6 months
March 9, 2004
1 year
June 15, 2004
30 days
October 1, 2004
45 days
April 12, 2004
2 years
February 5, 2004
60 days
May 21, 2004
90 days
June 23, 2004
20 days
Assessment:


Observation
Quiz on Simple Interest
Activity 7.7.2 – Calculating Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Quiz on Simple Interest
1. John Allison borrowed $2,000 for a period of 2 months from the bank. The bank
agreed to a 2% interest if paid back within the 2 months. What is the amount of the
interest?
a. $82.00
b. $40.00
c. $80.00
d. $160.00
2. Jayne George borrowed $5,000 for a period of 5 months from the bank. The bank
agreed to a 5% interest rate. What is the maturity value of the note?
a. $5,000.00
b. $104.16
c. $104.17
d. $5,104.17
3. Jimmie James borrowed $9,000 for a period of 90 days from the bank. The bank
agreed to a 9% interest rate. What is the principal?
a. $202.50
b. $9,000.00
c. $9,202.50
d. $101.25
4. Sally Samson borrowed $12.00 for 5 days from a friend. She agreed to pay her
100% interest for the loan. What was the amount of the interest on the loan?
a. $12.00
b. $12.17
c. $.17
d. $24.00
5. Jennifer John borrowed $7,200 to purchase her first car. She agreed to pay her
parents interest of 6% and pay the money back in 2 years. How much will she end
up paying for the car?
a. $7,200.00
b. $864.00
c. $8,064.00
d. $80.00
6. If in the above situation, Jennifer had agreed to make a payment each month, how
many payments would she make?
a. 48
b. 24
c. 2
d. 12
Activity 7.7.2 – Quiz on Simple Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
7. What would be the amount of each payment in Jennifer John’s situation?
a. $363.00
b. $336.00
c. $3,600.00
d. 0
8. Sam Suzette’s Mother decides to purchase a new stove. The cost of the stove is
$950.00. She takes a loan out for 3 months to pay for the stove. The interest rate
is 14%. How much interest will she pay?
a. $333.25
b. $33.25
c. $950.00
d. $983.25
9. Karin Kyle purchases a new television for her apartment. It costs $5,500.00. She
plans to pay it off within a year at 21% interest rate. What will the maturity value
be?
a. $6,655.00
b. $5,500.00
c. $1,155.00
d. $6,655.00
Activity 7.7.2 – Quiz on Simple Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
KEY - Quiz on Simple Interest
1.
John Allison borrowed $2,000 for a period of 2 months from the bank. The bank
agreed to a 2% interest if paid back within the 2 months. What is the amount of
the interest?
a. $82.00
b. $40.00
c. $80.00
d. $160.00
2.
Jayne George borrowed $5,000 for a period of 5 months from the bank. The
bank agreed to a 5% interest rate. What is the maturity value of the note?
a. $5,000.00
b. $104.16
c. $104.17
d. $5,104.17
3.
Jimmie James borrowed $9,000 for a period of 90 days from the bank. The
bank agreed to a 9% interest rate. What is the principal?
a. $202.50
b. $9,000.00
c. $9,202.50
d. $101.25
4.
Sally Samson borrowed $12.00 for 5 days from a friend. She agreed to pay her
100% interest for the loan. What was the amount of the interest on the loan?
a. $12.00
b. $12.17
c. $.17
d. $24.00
5.
Jennifer John borrowed $7,200 to purchase her first car. She agreed to pay her
parents interest of 6% and pay the money back in 2 years. How much will she
end up paying for the car?
a. $7,200.00
b. $864.00
c. $8,064.00
d. $80.00
6.
If in the above situation, Jennifer had agreed to make a payment each month,
how many payments would she make?
a. 48
b. 24
c. 2
d. 12
Activity 7.7.2 – Quiz on Simple Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
7.
What would be the amount of each payment in Jennifer John’s situation?
a. $363.00
b. $336.00
c. $3,600.00
d. 0
8.
Sam Suzette’s Mother decides to purchase a new stove. The cost of the stove
is $950.00. She takes a loan out for 3 months to pay for the stove. The interest
rate is 14%. How much interest will she pay?
a. $333.25
b. $33.25
c. $950.00
d. $983.25
9.
Karin Kyle purchases a new television for her apartment. It costs $5,500.00.
She plans to pay it off within a year at 21% interest rate. What will the maturity
value be?
a. $6,655.00
b. $5,500.00
c. $1,155.00
d. $6,655.00
Activity 7.7.2 – Quiz on Simple Interest
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.7.3 – Calculating Proceeds
Course Title – Accounting I
Session Title –Notes and Interest
Activity Purpose - Demonstrate skill in calculating proceeds on a discounted note.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.e. calculate and record notes payable
and notes receivable;
4.g. calculate interest due and payable
and journalize transactions involving
notes payable and receivable;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
6.c. – post to an accounts payable
subsidiary ledger;
6.e. – prepare an accounts payable
schedule;
7.d. – post to an accounts receivable
subsidiary ledger;
7.h. – prepare an accounts receivable
schedule
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Spreadsheet Software
Teaching Strategies:



Observation
Verbal Drills
Demonstration
Activity 7.7.3 – Calculating Proceeds
reserved.
Copyright © Texas Education Agency, 2011. All rights
ACCOUNTING 1
Activity Outline:
1. Discuss the term “proceeds.” Use other ways the term is used to relate it to
this situation.
2. Demonstrate the formula to calculate proceeds from a discounted note.
Step 1:
Discount
Rate
Maturity Value
$6,000.00 X
6%
X
Time
Bank
Discount
6 months =
$180.00
Step 2:
Maturity
Value
$6000.00 -
Bank
Discount
$180.00
=
Proceeds
$5,820.00
3. Demonstrate the formula to calculate proceeds using a Discounted Notes
spreadsheet. Have your students calculate these problems and write their
answers on a sheet of paper.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Maturity
Value
$12,000.00
$6,000.00
$18,000.00
$1,800.00
$1,900.00
$4,500.00
$16,050.00
$18,000.00
$25,115.00
Interest
Rate
12%
6%
18%
18%
19%
4.5%
16%
18%
25%
Time
Bank
Discount
Proceeds
12 months
6 months
1.5 years
80 days
19 months
450 days
4 years
180 days
2 years
Assessment:


Observation
Graded Assignment
Quality Feature
Student effectively participates in classroom activities
Student accurately answers the problems for bank discounts
and proceeds.
Completes in a timely manner.
Activity 7.7.3 – Calculating Proceeds
reserved.
Score
Copyright © Texas Education Agency, 2011. All rights
ACCOUNTING 1
Activity 7.7.4 – Analyzing and Journalizing Notes
Transactions
Course Title – Accounting I
Session Title –Notes and Interest
Activity Purpose - Demonstrate skill in analyzing and journalizing transactions
relating to notes.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.e. calculate and record notes payable
and notes receivable;
4.g. calculate interest due and payable
and journalize transactions involving
notes payable and receivable;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
6.c. – post to an accounts payable
subsidiary ledger;
6.e. – prepare an accounts payable
schedule;
7.d. – post to an accounts receivable
subsidiary ledger;
7.h. – prepare an accounts receivable
schedule
TAKS Correlation:
N/A
Materials, Equipment and Resources:




Textbook
Multimedia Presentation Software
Accounting Software
Journal Input Forms
Teaching Strategies:


Observation
Verbal Drills
Activity 7.7.4 – Analyzing and Journalizing
Notes Transactions
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Explain and demonstrate the following new accounts used in journalizing
notes:
Interest Expense, Interest Income, Notes Payable, Notes Receivable
2. Demonstrate and explain transactions relating to notes using a Journalizing
Notes presentation you prepare or an online resource.
3. After the slide show, have your students use the examples to enter into a
journal input form.
4. Have your students use their accounting software to enter the transactions.
Assessment:



Observation
Analyzing Notes Quiz
Graded Assignment
Quality Feature
Student effectively participates in classroom activities
Student accurately answers the problems for bank discounts
and proceeds.
Completes in a timely manner.
Activity 7.7.4 – Analyzing and Journalizing
Notes Transactions
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Analyzing Notes Quiz
Draw “T” accounts to illustrate these transactions. Calculate interest or
discount if necessary.
1. Paid cash for maturity value of Note Payable; principal $2,000 plus
interest of $230.00 for a total of $2,230.00.
2. Discounted at 6.5% a 9-month, non-interest-bearing note, $3,000.00;
proceeds $146.25.
3. Issued a 30-day, 5% note to Mountain Cleaning Crew for an extension
of time on account payable, $90.00.
4. Paid cash for the maturity value of non-interest bearing note payable
for $1,200.00.
5. Issued a 6 month, 7.5% note, $5,000.00.
6. Received a 3-month, 9% note from Karin Kimson for an extension of
time on her account, $501.00.
7. Received cash from the maturity value of the last transaction, principal,
$501.00 plus interest and the total. (Calculate the interest and the
total.)
8. Lorie Lancely dishonored Note Receivable at 9.5%. The principal of
$291.00 plus interest was due today. (Calculate the interest and total.)
7.7.4 – Analyzing Notes Quiz
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1