Lesson Plan 2.2 – Accounting for Notes Receivable Course Title: Accounting II Lesson Title: Accounting for Notes Receivable Specific Objective: Understand the need for notes receivable. Learn the proper accounting procedure for handling notes receivable transactions. TEKS: 130.167.c.2: G – complete a work sheet for a corporation; J – produce a balance sheet for a corporation; K – formulate a cash flow statement. TAKS: R1, M1, M10 Performance Objectives: Explain why a business uses negotiable instruments; Determine a Promissory Note’s maturity date; Calculate a Promissory Note’s interest and maturity value; Determine the bank discount on a discounted note; Journalize entries for notes receivable; Identify accounting concepts and practices related to unearned revenue and accrued revenue; Journalize adjusting and reversing entries for unearned revenue initially recorded as revenue; Journalize adjusting and reversing entries for accrued revenue; Define accounting terms related to the lesson. Preparation Materials and Equipment Checklist: Overhead projector Glencoe’s Textbook, Chapter 4, pp. 114-135, and Demonstration Problems Century 21’s Textbook, Chapter 10, pp. 276-289. Accounting software and spreadsheet software. Teaching Strategies: Demonstrate problems from textbooks. Sponge/Focus Activity: Exploring the Real World of Business, p. 114 from Glencoe’s Textbook. Discuss why a business might extend the time for payment from a customer. Evaluate “90-day same as cash” plans some businesses offer. o What do they mean? o What are the repayment terms if the loan is not paid in 90 days? Lesson Content: See Glencoe’s Textbook, Chapter 4, pp 114-135, or Century 21’s Textbook, Lesson Plan 2.2 – Accounting for Notes Receivable Copyright © Texas Education Agency, 2011. All rights reserved. ACCOUNTING II Chapter 10, pp. 276-289. Here is an outline: I. II. III. Negotiable Instruments a. Promissory Notes 1. Determining a note’s maturity date 2. Calculating interest on a note 3. Calculating interest using an interest table Notes Receivable a. Recording the receipt of a note receivable b. Recording the receipt of cash for a note receivable c. Dishonored notes receivable Discounting notes receivable a. Discounted Notes 1. Contingent liability 2. Recording discounted notes receivable 3. Recording the removal of paid discounted notes receivable 4. Dishonor of discounted notes receivable. b. The Accrual Basis of Accounting 1. Adjusting for accrued interest 2. Receiving payment for accrued interest c. Drafts and Trade Acceptances Assessment: For problems you can use Peachtree Accounting from Glencoe, Glencoe Accounting Software, Century 21 Accounting Software, or a spreadsheet. From Glencoe’s Textbook Problems o Guided Practice 4-1 Determining a Note’s Maturity Date, Interest, and Maturity Value, p 120 4-2 Recording Note Transactions, p. 125 4-3 Analyzing a Source Document, p. 125 4-4 Note Computations, p. 134 o Independent Practice 4-5 Spreadsheet Problem: Notes Receivable Computations, p. 139 4-6 Recording the Issuance and Collection of a Note Receivable, p. 139-140 4-7 Recording Dishonored Notes Receivable, p. 140 4-8 Discounting a Note Receivable, p. 140-141 4-9 Recording a Dishonored Discounted Note Receivable, p. 141 o Additional Activities: Using Key Terms, Understanding Accounting Concepts and Procedures, Case Study, Conducting an Audit with Alex, Internet Connection, and Workplace Skills, pp. 136-137 From Century 21’s Textbook o Guided Practice Work Together: Journalizing Notes Receivable Transactions, p. 282 Lesson Plan 2.2 – Accounting for Notes Receivable Copyright © Texas Education Agency, 2011. All rights reserved. ACCOUNTING II On Your Own: Journalizing Notes Receivable Transactions, p. 282 Work Together: Journalizing adjusting and reversing entries for unearned revenue initially recorded as revenue and for accrued revenue, p. 287 On Your Own: Journalizing adjusting and reversing entries for unearned revenue initially recorded as revenue and for accrued revenue, p. 288 o Independent Practice 10-1 Journalizing transactions for notes receivable, p. 290 10-2 Journalizing adjusting and reversing entries for unearned revenue initially recorded as revenue, p. 290 10-3 Journalizing adjusting and reversing entries for accrued revenue, p. 290 10-4 Journalizing notes receivable, unearned revenue, and accrued revenue initially recorded as revenue transactions 10-5 Journalizing accounts and notes receivable, p. 291-292 o Additional Activities: Applied Communication and Cases for Critical Thinking, p. 292 This lesson is also assessed through the Unit Test at the end of the Unit. Additional Resources: Textbooks: Guerrieri, Donald J., F. Barry Haber, William B. Hoyt, and Robert E. Turner, Glencoe Accounting Real-World Applications & Connections, Advanced Course, Fourth Edition, Glencoe McGraw-Hill: New York, New York. Ross, Kenton E., CPA, Mark W. Lehman, CPA, Claudia Bienias Gilbertson, CPA, Robert D. Hanson, Century 21 Accounting Advanced, Anniversary Edition, Thomson South-Western: Mason, OH, 2003. Multimedia: Century 21’s Teacher’s Resource CD Websites: http://accounting.swpco.com Lesson Plan 2.2 – Accounting for Notes Receivable Copyright © Texas Education Agency, 2011. All rights reserved. ACCOUNTING II