1, 2015, your balance sheet will show 10,000 of puritan discount code cash and 10,000 of notes payable.
As the months go on, you will accrue interest.The discount is amortized over the lifetime of the notes.In order for the lender to get a return on their zero interest notes payable, the notes are issued at a lower price than their face value.Want to learn more?At the end of the 10 years Big Ben will have paid the bank back the full 10,000.Which bank should you lend the money from?The discount on note payable will have been amortized, increasing the value of our note payable.The cash amount in fact represents the present value of the notes payable and the interest included is referred to as the discount on notes payable.On July 1, 2016, your interest expense is equal to the 'Discount on Note Payable' multiplied by 9/9 900, which you record as interest expense.
If Big Ben actually needed 10,000 in order to purchase his new piece of equipment, he would have to take out a 33,906.13 note with the same interest and payment amounts.
Liz told both banks you need to borrow 10,000 to pay back in 9 months.
This is the amount of cash Ordinary Bank will give you today.
It decides to talk with a bank about long-term notes.
Non Interest Bearing Note Example Journal Entry.
We hotel chain rewards programs will walk through the journal entries as we try and decide which bank, First National Bank or Ordinary Bank, we wish to borrow money from to start a food truck business.
Definition, a bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value.Lesson Summary, in this lesson, you learned how to account for interest-bearing and non-interest bearing notes.YES NO 11 people found this helpful.It's like asking your brother for money.Try it risk-free, no obligation, cancel anytime.Non-interest-bearing note A bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value.