Chapter 14, Problem 14.1Q

What conditions or terms does a note payable contain?

To determine

Conditions or terms of notes payable.

Answer to Problem 14.1Q

The different terms and conditions on the notes payable are the points decided at the time of the agreement which is the amount of principal, the interest rate and the date of maturity.

Explanation of Solution

Notes Payable:

Notes payable is a financial instrument in which an agreement is made between the two parties that the borrower gets a specific sum of money from a lender. A written promise is made that the amount will be paid back in a specific time period and at a specific interest rate.

The terms and the conditions of the notes payable are as follows:

• Principal amount which is the sum of money that lender lends to the borrower.
• Interest rate is the rate at which money is borrowed by the borrower.
• Maturity date is the specific time period for which principal amount is lending to the borrower.

Hence, the notes payable is an agreement between borrower and lender for a specific time period and sum of money. Borrower promises to pay principal amount along with the interest to the lender.

Conclusion

Thus, the terms and conditions of the notes payable are the amount of principal, rate of interest and the date of maturity which is decided at the time of agreement.