1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-1 Promissory Notes

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 20-1 USES OF PROMISSORY NOTES page 589 1. 1.Number 8. 8.Maker 7. 7.Maturity date 6. 6.Interest rate 5. 5.Principle 3. 3.Payee 2. 2.Date of a note 4. 4.Time of a note

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 20-1 Interest for One Year = Time in Years × Interest Rate ×Principal INTEREST ON PROMISSORY NOTES page 590 Interest for One Year $1,200.00=1×6%×$20,000.00 Interest for Fraction of Year = Time as Fraction of Year × Interest Rate ×Principal Interest for Fraction of Year $300.00=×6%×$20,000.00 90 360

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 20-1 Maturity Value =Interest+Principal INTEREST ON PROMISSORY NOTES page 590 Maturity Value $20,300.00=$300.00+$20,000.00

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 20-1 MATURITY DATE OF PROMISSORY NOTES page 591 May 18, 90-Day Note May18–May 3113 days June30 days July31 days August 1–August 1616 days Total90 days 3 4 1 2 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.

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 20-1 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 maker of a note promissory note creditor notes payable interest maturity value page 592

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-2 Notes Payable

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 20-1 SIGNING A NOTE PAYABLE 1 2345 page 593 May 18. Signed a 90-day, 6% note, $20,000.00. Receipt No. 345. 1.Write the date. 2.Write the account title. 3.Write the receipt number. 4.Write the principle amount in the General Credit column. 5.Write the same amount in the Cash Debit column.

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 20-1 PAYING PRINCIPLE AND INTEREST ON A NOTE PAYABLE 1 2 34 56 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. 7 1.Write the date.6.Write the interest expense amount. 2.Write the account title. 7.Write the amount of cash paid. 3.Write the check number. 4.Write the note’s principal amount. 5.Write the account title.

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 20-1 SIGNING A NOTE PAYABLE FOR AN EXTENSION OF TIME 1 2 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. 2. Credit to Notes Payable 1. Debit to Accounts Payable

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 20-1 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.

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 20-1 TERMS REVIEW current liabilities interest expense page 597

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-3 Notes Receivable

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 14 LESSON 20-1 ACCEPTING A NOTE RECEIVABLE FROM A CUSTOMER 1 2 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.Debit to Notes Receivable 2.Credit to Accounts Receivable

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 15 LESSON 20-1 COLLECTING PRINCIPAL AND INTEREST ON A NOTE RECEIVABLE 1 234 56 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. 7 1.Write the date. 2.Write the account title. 5.On the next line, write the account title. 3.Write the receipt number. 6.Calculate and write the interest income amount. 4.Write the principal amount. 7.Write the maturity value.

16. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 20-1 RECORDING A DISHONORED NOTE RECEIVABLE 1 2 3 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.Debit to Accounts Receivable 2.Credit to Notes Receivable 3.Credit to Interest Income

17. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 17 LESSON 20-1 TERMS REVIEW notes receivable interest income dishonored note page 602