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LESSON 20-3

LESSON 20-3. Notes Receivable. NOTES RECEIVABLE. Def. – promissory notes that a business accepts from customers. Classification – current asset Purpose – used for when customers are requesting an extension of time on accounts receivable.

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LESSON 20-3

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  1. LESSON 20-3 Notes Receivable

  2. NOTES RECEIVABLE • Def. – promissory notes that a business accepts from customers. • Classification – current asset • Purpose – used for when customers are requesting an extension of time on accounts receivable. • When an extension is granted – total amount owed (AR) is now classified as NR – note receivable. LESSON 20-3

  3. Journalizing Notes Receivable • Receipt of NR - journalized General journal • Debit – Notes Receivable • Credit – Accounts Receivable / Customer • Receipt of payment from Note Receivable – Cash receipts journal • Debit - Cash • Credit – Notes Receivable & Interest Income • Dishonored Notes Receivable – customer does not pay note on maturity date • Journalized – general journal • Debit – Accounts Receivable / Customer • Credit – Notes Receivable & Interest Income LESSON 20-3

  4. 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 LESSON 20-3

  5. 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 3 4 1 7 5 6 1. Write the date. 5. On the next line, write the account title. 2. Write the account title. 6. Calculate and write the interest income amount. 3. Write the receipt number. 4. Write the principal amount. 7. Write the maturity value. LESSON 20-3

  6. 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 LESSON 20-3

  7. TERMS REVIEW page 602 • notes receivable • interest income • dishonored note LESSON 20-3

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