Notes Receivable
Compiled by: Dwight B. Terez, CPA
Notes Receivables
De nition:
Notes receiv ble re cl ims supported by form l promises to p y usu lly in the forms of
notes.
Negoti ble promissory note is n uncondition l in writing m de by one person to nother,
signed by the m ker, eng ging to p y on dem nd or t ixed determin ble future time sum
cert in in money to order or be rer.
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Notes Receivables
Measurement:
Initi l Me surement:
Short-term notes receiv ble - me sured t f ce v lue.
Long-term notes receiv ble:
- Interest-be ring notes receiv ble - me sured t f ce v lue.
- Noninterest-be ring notes receiv ble - me sured t present v lue.
Subsequent Me surement:
- Long-term notes receiv ble - me sured t mortized cost.
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Notes Receivables
Measurement:
The mortized cost is the mount t which the note receiv ble is me sured initi lly:
. Minus princip l rep yment
b. Plus or minus cumul tive mortiz tion of ny di erence between the initi l c rrying mount
nd the princip l m turity mount
c. Minus reduction for imp irment or uncollectibility
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Notes Receivables
Measurement:
The mortized cost is the mount t which the note receiv ble is me sured initi lly:
. Minus princip l rep yment
b. Plus or minus cumul tive mortiz tion of ny di erence between the initi l c rrying mount
nd the princip l m turity mount
c. Minus reduction for imp irment or uncollectibility
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Notes Receivables
Measurement:
An entity owned tr ct of l nd costing 800,000 nd sold the l nd for 1,000,000.
The entity received received 3-ye r note for 1,000,000 plus interest of 12% compounded
nnu lly.
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Notes Receivables
Measurement:
An entity m nuf ctures nd sells m chinery. On J nu ry 1, 202, the entity sold m chinery
costing 280,000 for 400,000.
The buyer signed non-interest be ring note for 400,000, p y ble in four equ l inst llments
every December 31.
The c sh s les price of the m chinery is 350,000.
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Notes Receivables
Measurement:
On J nu ry 1, 2020, n entity sold n equipment with cost of 250,000 for 400,000.
The buyer p id down of 100,000 nd signed non-interest be ring note for 300,000
p y ble in equ l nnu l inst llment of 100,0000 every December 31.
The prev iling interest r te for note of this type is 10%.
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Notes Receivables
Measurement:
On J nu ry 1, 2020, n entity sold n equipment with cost of 250,000 for 400,000.
The buyer p id down of 100,000 nd signed non-interest be ring note for 300,000
p y ble in equ l nnu l inst llment of 100,0000 every December 31.
The prev iling interest r te for note of this type is 10%.
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Notes Receivables
Measurement:
On J nu ry 1, 2020, n entity sold n equipment costing
P600,000 with ccumul ted depreci tion of P250,000.
The entity received s consider tion P100,000 c sh nd P400,000 noninterest be ring note
due on J nu ry 1, 2023.
The prev iling r te of interest for note of this type is 10%.
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