15. Received C. S. Poe's note at 15 days for $100, in full of account. 18. 20. 24. 25. 27. 30. C. S. Poe paid his note of the 8th, for $175. Sold an invoice of goods to S. N. King for $218, on D. E. Kramer paid his note of the 9th, for $425. C. S. Poe paid his note of the 15th, for $100. Notes Payable are notes issued by the business which the business must pay. Rules for Notes Payable. Debit Notes Payable at the face value when our notes are paid by the business. Credit Notes Payable at the face value when our notes are issued by the business. If the business pays C. S. Kerr $200 on account, the debit and credit effect would be If, instead of paying cash, the business gives him a note for $200, the entry would be a credit to Notes Payable instead of to Cash. JOURNAL 9 Gave my note 200 To Notes Payable at 30 days, on acch. 200 When the maker pays his note, Notes Payable must be debited and Cash credited in the Cash Book. CASH PAYMENTS Nov. 8 200 Notes Payable Favor CD. Kendi Notes Payable account must show a liability if the account does not balance. It should be closed as on page 70. Exercise 17. On journal paper make entries for the following trans actions. October 3. Bought an invoice of goods of J. A. Burk for $260, on account. 5. Gave J. A. Burk my note, payable 20 days after date, for $160, on account. 7. Bought an invoice of goods of C. E. Haws for $385, on account. 9. Bought an invoice of goods of G. R. Rand for $475, and gave my note, payable 10 days after date, in payment. Make two entries. 10. 14. 16. 18. 19. 23. 25. 28. Paid C. E. Haws cash on account, $150. Bought an invoice of goods of B. E. Bond, on account, $380. Paid J. A. Burk $100 on account. Gave C. E. Haws my note, payable 10 days after date, for $235. Paid G. R. Rand for my note of the 9th, $475. Gave B. E. Bond my note, payable 30 days after date, for $180, on account. Paid J. A. Burk cash for my note of the 5th, $160. Paid C. E. Haws cash for my note of the 18th, $235. Exercise 18. On journal paper make entries for the following transactions. Do not forget that the explanation of each entry is important. November 2. Gave S. N. Hammond my note, payable in 30 days, for $375, on account. 4. Received B. C. Chase's note, payable in 15 days, for $250, on account. 5. Gave H. C. Field my note, payable in 30 days, for $185, on account. 7. Gave C. N. Day my note, payable in 10 days, for $413.50, on account. 9. Received S. G. Hoan's note, payable in 15 days, for $95, on account. 12. Bought merchandise of C. D. Traxler amounting to $127.50, and gave my note, payable in two months, in payment. Make two entries. 14. Received F. A. Frame's note, payable in three months, for $750, on account. 16. 18. Gave G. E. Minster my note, payable in 45 days, for $600, on account. Sold merchandise to S. E. Niles amounting to $247, and received his note, payable in 60 days, in pay ment. How many entries should be made? Why? 20. Received H. I. Larson's note, payable in 15 days, for $450, on account. Exercise 19. Find the date of maturity of each note in Exercise 18, and make entries in a manuscript cash book for the payment of each note. CHAPTER X INTEREST AND DISCOUNT ON NOTES Interest is money paid for the use of money. When a note contains a promise to pay a certain sum of money with interest at a specified rate or simply with interest, the note is said to bear interest. The sum paid at maturity for the use of the money is interest. When interest is allowed or paid in advance for the use of money, it is commonly called discount. It is just as much interest as if it were paid after one has enjoyed the use of the money. The 60-Day Method. This method is based on the principle that the Interest of 1 for Interest of 1 for 60 days, at the rate of 6%, is .01 Interest of 1 for .10 This method is an easy one to use because it is on the decimal system. To multiply by .01, point off two places to the left in the principal. To multiply by .001, point off three places to the left in the principal. By .10, one place. Any number of days may be divided into fractional parts of 600, 60, or 6, or into multiples of them. For Example: For 15 days, take For 18 days, take 3 For 25 days, take 4 of the interest for 60 days. For 50 days, take the interest for 30 days (of 60) and for 20 days (of 60). The interest should always be found for the time at 6% and then at the given rate by adding or subtracting a fractional part. For Example: At 5% find the interest at 6% and subtract of it. Problem: Find the interest of $127.25 for 51 days at 5%. . 12725 Interest for 6 days at 6% .0636 Interest for 3 days at 6% The interest is, then, 90¢. The Cancellation Method is preferred by some. The formula is as follows: If the rate is six per cent, the formula may be contracted to In the last chapter, the principle was established that Notes Receivable and Notes Payable must be debited and credited at their face value. This principle is not changed when a note bears interest. Whatever allowance is made for interest must be entered in a separate account, the Interest account. If C. D. Cook gave his note to the business on January 8, for $375, payable 60 days after date, with interest at 6%, the entry in the journal would be Notes Receivable, $375 To C. D. Cook, $375 When the note is paid on March 9, the result would be To Notes Receivable, $375.00 As an entry on the Cash Receipts it would be made as follows: Mar. 9 а Notes Receivable C. D. Cook's note 375 375 |