Q1. Define a note receivable and give an 30 examples how interest is calculated on a short-term note...

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Q1. Define a note receivable and give an 30 examples how interest is calculated on a short-term note receivable.

Q2. How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables? Explain with 30 examples

Q3. Explain what is meant by depreciation Describe the methods of depreciation and give a numerical 30 examples for each method

Q4. Explain how to calculate times interest earned and explain with an 30 examples how it is used to analyze a company

David · Accepted Answer

ANSWER 1 
A note receivable represents a formal legal instrument which acknowledges a debt. When the accounts 
receivable are represented by an instrument it is termed as note receivable. It is also known as a 
promissory note as it carries a promise to pay on a particular date for the value received. It generally 
carries payment of interest by the debtor. The note receivable may be short term or long term. When 
the note is receivable within a period of 12 months from the date of issue, it is termed as short term 
note receivable. In this case, the interest is normally to be computed and accounted at the end of the 
period. 
Interest is computed using basic formula 
Interest = amount of note receivable (P) * rate % * days / 365 
FOR EXAMPLE, 
X sells goods of $ 10000 to Y and Y gives a note for 90 days committing interest @ 10% p.a. 
After 3 months, X will get $ 10000 plus interest of 10000*10%* 90/365 
i.e. $246.58 
Total amount to be received is 10246.58
ANSWER 2 
There are two methods of accounting for bad debts (Uncollectible accounts receivables)- 
1. Direct write off method 
2. Allowance method 
DIRECT WRITE OFF METHOD 
Under this method, the debtors remain unchanged till the time of confirmation of bad debts and hence 
the income statement remains unaffected till the confirmation of bad debt. This method is criticized for 
not following the proper matching concept although it is simpler method to follow and does not involve 
estimation.

Q1. Define a note receivable and give an 30 examples how interest is calculated on a short-term note receivable. Q2. How are the direct write-off method and the allowance method applied in accounting...

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