LESSON 20-1
Promissory Notes
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
USES OF PROMISSORY NOTES
1. Number
4. Time of a note
page 589
2. Date of a note
3. Payee
5. Principle
8. Maker
6. Interest rate
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
7. Maturity date
LESSON 20-1
3
INTEREST ON PROMISSORY NOTES
page 590
Interest for One Year
Principal
×
Interest
Rate
$20,000.00
×
6%
×
Time in
Years
=
Interest for
One Year
×
1
=
$1,200.00
Interest for Fraction of Year
Principal
×
Interest
Rate
$20,000.00
×
6%
Time as
× Fraction of =
Year
Interest for
Fraction of
Year
90
360
$300.00
×
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
=
LESSON 20-1
4
INTEREST ON PROMISSORY NOTES
page 590
Maturity Value
Principal
+
Interest
=
Maturity
Value
$20,000.00
+
$300.00
=
$20,300.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
5
MATURITY DATE OF PROMISSORY
NOTES
page 591
May 18, 90-Day Note
May18–May 31
June
July
August 1–August 16
Total
13 days
30 days
31 days
16 days
90 days
1
2
3
4
1. Subtract the date of the note from the number of days in
the first month.
2. Add 30 days for June.
3. Add 31 days for July.
4. Add only 16 days in August.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
6
TERMS REVIEW







number of a note
date of a note
payee of a note
time of a note
principal of a note
interest rate of a note
maturity date of a note
page 592






maker of a note
promissory note
creditor
notes payable
interest
maturity value
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
LESSON 20-2
Notes Payable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
8
SIGNING A NOTE PAYABLE
page 593
May 18. Signed a 90-day, 6% note, $20,000.00. Receipt No. 345.
1
2
1.
2.
3.
4.
5.
3
4
5
Write the date.
Write the account title.
Write the receipt number.
Write the principle amount in the General Credit column.
Write the same amount in the Cash Debit column.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
9
PAYING PRINCIPLE AND INTEREST ON A
NOTE PAYABLE
page 594
August 16. Paid cash for the maturity value of the May 18 note: principal,
$20,000.00, plus interest, $300.00; total, $20,300.00. Check No. 721.
2
1
1.
2.
3.
4.
3
6
Write the date.
Write the account title.
Write the check number.
Write the note’s
principal amount.
5. Write the account title.
4
7
5
6. Write the interest
expense amount.
7. Write the amount
of cash paid.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
10
SIGNING A NOTE PAYABLE FOR AN
EXTENSION OF TIME
page 595
June 5. Restaurant Supply signed a 90-day, 12% note to Hayport
Company for an extension of time on its account payable,
$4,000.00. Memorandum No. 66.
1
2
1. Debit to Accounts Payable
2. Credit to Notes Payable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
11
PAYING A NOTE PAYABLE ISSUED FOR
AN EXTENSION OF TIME
page 596
September 3. Paid cash for the maturity value of the note payable
to Hayport Company: principal, $4,000.00, plus interest, $120.00;
total, $4,120.00. Check No. 722.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
12
TERMS REVIEW
page 597
 current liabilities
 interest expense
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
LESSON 20-3
Notes Receivable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
14
ACCEPTING A NOTE RECEIVABLE FROM
A CUSTOMER
page 598
April 14. Accepted a 90-day, 8% note from Martin Sterling for an
extension of time on his account, $3,000.00. Note Receivable No. 9.
1
2
1. Debit to Notes Receivable
2. Credit to Accounts Receivable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
15
COLLECTING PRINCIPAL AND INTEREST
ON A NOTE RECEIVABLE
page 599
July 13. Received cash for the maturity value of Note Receivable
No. 9, a 90-day, 8% note: principal, $3,000.00, plus interest,
$60.00; total, $3,060.00. Receipt No. 562.
2
1
3
5
1.
2.
3.
4.
Write the date.
Write the account title.
Write the receipt number.
Write the principal amount.
4
6
7
5. On the next line, write the
account title.
6. Calculate and write the interest
income amount.
7. Write the maturity value.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
16
RECORDING A DISHONORED NOTE
RECEIVABLE
page 600
May 6. Jill Davis dishonored Note Receivable No. 12, a 90-day, 8%
note, maturity value due today: principal, $600.00; interest, $12.00;
total, $612.00. Memorandum No. 92.
1
2
3
1. Debit to Accounts Receivable
2. Credit to Notes Receivable
3. Credit to Interest Income
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1
17
TERMS REVIEW
page 602
 notes receivable
 interest income
 dishonored note
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 20-1