1. Notes Receivable

   On September 1, 2017, Cowell Corp. accepted a six-month, 7%, $43,800 interest-bearing note from Pattison Inc. in payment of an account receivable. Cowell's year-end is December 31. Pattison paid the note and interest on the due date. Assume 360 days in the year.

   Required:

   1. Who is the maker and who is the payee of the note? The maker is Pattison Inc. and the payee is Cowell Corp. .

   2. What is the maturity date of the note? March 1, 2018

   3. Identify and analyze the effect of the transactions or adjustments to be recorded on each of the following dates:

   a. September 1, 2017

   Activity	Investing
   Accounts	Notes Receivable Increase, Accounts Receivable Increase
   Statement(s)	Income Statement only

   Determine activity. 1) Financing activities are transactions (other than payment of interest) involving borrowing from creditors or repaying creditors. This also includes transactions with the company's owners. Businesses borrow money or raise money from selling of their stock. 2) Investing activities are obtaining money by building up operations or purchasing investment products such as stocks, bonds and annuities. 3) Operating activities are the sale of products and/or services, and the costs incurred to operate a business. Determine financial statement accounts affected, balance sheet or income statement. Determine accounts and amount of increases/decreases. Balance Sheet accounts: Assets = Liabilities + Stockholders' Equity. Income Statement accounts: Revenues - Expenses = Net Income. (Equations must stay in balance) Sept 1, 2017: Record acceptance of Notes Receivable for amount transferred from Accounts Receivable.

   How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

   Balance Sheet

   Income Statement

   Stockholders'

   Net

   Assets

   =

   Liabilities

   +

   Equity

   Revenues

   Expenses

   =

   Income

   b. December 31, 2017

   Activity
   Accounts
   Statement(s)

   Dec 31, 2017: 1) Calculate interest revenue for four months = principle x rate x time. 2) Companies must record interest when it is earned. The interest earned will be received on the maturity date. 3) This is an accrued asset, revenue earned before cash is received. Revenue earned before receipt of cash.

   How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

   Balance Sheet

   Income Statement

   Stockholders'

   Net

   Assets

   =

   Liabilities

   +

   Equity

   Revenues

   Expenses

   =

   Income

   c. March 1, 2018

   Activity
   Accounts
   Statement(s)

   March 1, 2018: Calculate interest revenue for two months = principle x rate x time. Record Interest Revenue earned.

   How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

   Balance Sheet

   Income Statement

   Stockholders'

   Net

   Assets

   =

   Liabilities

   +

   Equity

   Revenues

   Expenses

   =

   Income

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