Slide 10-11 Notes payable PROMISSORY NOTE Miami Fl Nov.1,1999 Location Date Six months after this date Porter Company promises to pay to the order of Security National Bank the sum of $10,000.00 with interest at the rate of 12.0% per annum signed 如 lohn caldwell title treasurer Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-11 Irwin/McGraw-Hill Notes Payable PROMISSORY NOTE Location Date after this date promises to pay to the order of the sum of with interest at the rate of per annum. signed title Miami, Fl Nov. 1, 1999 Six months Porter Company John Caldwell Security National Bank $10,000.00 12.0% treasurer
Slide 10-12 Notes payable On November 1, 1999, Porter Company would make the following entry Date Description Debit Credit 1-Nov Cash 10.000 Note Payable 10.000 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-12 Irwin/McGraw-Hill Notes Payable On November 1, 1999, Porter Company would make the following entry. Date Description Debit Credit 1-Nov Cash 10,000 Note Payable 10,000
Slide 10-13 Interest Payable >Interest expense is the compensation to the lender for giving up the use of money for a period of time )The liability is called interest payable. Interest To the lender interest is a ate ur revenue To the borrower interest is an expense. Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-13 Irwin/McGraw-Hill Interest expense is the compensation to the lender for giving up the use of money for a period of time. The liability is called interest payable. To the lender, interest is a revenue. To the borrower, interest is an expense. Interest Rate Up! Interest Payable
Slide 10-14 Interest Payable The interest formula includes three variables that must be considered when computing interest: Interest s Principal ?Interest Rate ? Tirme When computing interest for one year, time?equals 1 When the computation period is less than one year, For example, if we needed to then time ?is a fraction compute interest for 3 months time ?would be 3/12 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-14 Irwin/McGraw-Hill The interest formula includes three variables that must be considered when computing interest: Interest = Principal ?Interest Rate ?Time When computing interest for one year, time?equals 1. When the computation period is less than one year, then time?is a fraction. Interest Payable For example, if we needed to compute interest for 3 months, time?would be 3/12
Slide 10-15 Interest Payable Example What entry would Porter Company make on December 31, the fiscal year-end? Dat Description De bit Credit Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-15 Irwin/McGraw-Hill What entry would Porter Company make on December 31, the fiscal year-end? Interest Payable Example Date Description Debit Credit