Chapter 13, Problem 13.4P

1

To determine

Notes Payable and Notes Receivables

Notes payable is a legal agreement prepared between issuer and payee. It is agreement between issuer and payee towards payment of total amount (principal and interest) based on certain interest and conditions. Here, particular value of interest is paid on the face value of note payable and thus, referred to interest payable.

Notes receivable is a legal agreement prepared between borrower and creditor. Here, borrower pays cash as per written deed to the seller on a future date.

To prepare: The necessary journal entries at December 31, 2016.

2

To determine

To prepare: Current and long-term liability sections of the December 31, 2016, balance sheet.