Explanation Note receivable: Note receivable refers to a written promise by the debtor for the amounts to be received within a stipulated period of 60-90 days or longer time. This written promise is issued by a debtor or, a borrower to the lender or, creditor. Notes receivable is an asset of a business. All revenues and expenses account must be adjusted at the end of each fiscal period, as per accrual accounting principle. Hence, interest revenue earned from the note receivable for 1 year must be recorded at the end of the December 31, 2015. Interest revenue for 1 year would be ( $ 10 , 000 × 10 % ) $1,000. Hence, $1,000 of interest revenue would be recorded in 2015

Loose-leaf for Fundamentals of Financial Accounting with Connect

5th Edition

ISBN: 9781259619007

Author: Fred Phillips Associate Professor

Publisher: McGraw-Hill Education

See similar textbooks

Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by t…

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable ari…

Videos

Question

Chapter 8, Problem 7MC

To determine

The effect of note receivable.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 8, Problem 6MC

Chapter 8, Problem 8MC

Students have asked these similar questions

18. On December 31, 2010, Chelsea Co. provides a service for its customer Villas Boas Co. inexchange for a promissory note requiring five annual payments of $1,000 each. The paymentsare to occur on December 31 of each year beginning on December 31, 2011. The note does notspecify any interest, and there is no market for the note. Based on the credit worthiness of VillasBoas Co. and the length of the note, it is estimated that Villas Boas Co. would have to pay 10%interest if it borrowed a similar amount from a bank. The income tax rate for Chelsea is 35%.The effect of the entries made on December 31, 2014 on net income is:a. $0b. An increase of $113c. An increase of $162d. A decrease of $162

a. What amount should be reported as interest expense for 2021? b. If no correction is made, by what amount would interest expense for 2021 be understated?

1. Interest has not yet been recorded on the notes payable which was taken out on March 1, 2020 with a 4% annual interest rate. The note has a three-year term and principal and interest are due on the maturity date. What is the interest? (Principle x rate x time)

Chapter 8 Solutions

Loose-leaf for Fundamentals of Financial Accounting with Connect

Ch. 8 - What are the advantages and disadvantages of...Ch. 8 - Prob. 2Q Ch. 8 - Which basic accounting principles does the...Ch. 8 - Using the allowance method, is Bad Debt Expense...Ch. 8 - What is the effect of the write-off of...Ch. 8 - How does the use of calculated estimates differ...Ch. 8 - Prob. 7Q Ch. 8 - What is the primary difference between accounts...Ch. 8 - What are the three components of the interest...Ch. 8 - Prob. 10Q

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

The effect of note receivable.

Solution Summary: The author explains that note receivable is a written promise by the debtor or borrower to the lender or, creditor. All revenues and expenses account must be adjusted at the end of each fiscal period.

Concept explainers

Videos

The effect of note receivable.

Want to see the full answer?

Chapter 8 Solutions