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Flashcards in Notes Receivable/Notes Payable Deck (10)
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1

Notes receivables/payables due in one year are recorded at

MATURITY VALUE

2

Notes receivables/payables due more than one year are recorded at

PRESENT VALUES

3

Discounting of NR

sale of NR to a bank

4

JE - Notes received solely for cash

Notes Receivable
Cash

5

JE - Notes received for goods or services
at reasonable rate, due within 1 year

Notes Receivable
Asset
Gain on Sale

No premium or discount
record asset at BV
record gain or loss

6

JE - Non interest bearing notes receivable
no state interest rate or unreasonable interest
FMV of note or of goods given

1. Compute the discount on NR:

Fair value of asset or note
-- Face value of note
= Discount on NR

Notes Receivable (at face)
Discount on NR
Asset (at BV)
Gain on sale

Face
-- FV of asset/or note = Discount

FV of asset
-- BV of asset = Gain on sale

7

JE - Notes receivable
FV of note and goods not given
reasonable interest for the kind of note is given

Compute present value of note using the
IMPUTED INTEREST

Face of note
-- Present value
== Discount on NR

Notes receivable
Discount on NR
Asset - at BV
Gain on sale

Face of note
minus PV = discount on NR

Present value of note
minus BV of asset
= Gain on sale

8

Discounting of notes receivable
Compute maturity value of note

Face plus accrued interest

9

Discounting of notes receivable
Compute proceeds of note

Maturity value
minus Discount (face X discount rate
x time remaining)
= Proceeds of note

10

JE - Discounting of notes receivable
When note is sold to a bank

Cash (proceeds)
Loss on discounting (plug)
Notes receivable