Note receivable:
Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or borrower to lender or creditor. Notes receivable is an asset of a business.
To determine: The amount of cash received from the discounting of the following notes:
Explanation of Solution
Note | Note Face Value | Date of Note | Interest Rate | Date Discounted | Discount Rate | Proceeds Received |
1 | $50,000 | 3/31/2016 | 8% | 6-30-16 | 10% | $50,350 (Note1) |
2 | 50,000 | 3/31/2016 | 8% | 9-30-16 | 10% | 51,675 (Note 2) |
3 | 50,000 | 3/31/2016 | 8% | 9-30-16 | 12% | 51,410 (Note 3) |
4 | 80,000 | 6/30/2016 | 6% | 10/31/2016 | 10% | 81,027 (Note 4) |
5 | 80,000 | 6/30/2016 | 6% | 10/31/2016 | 12% | 80,752 (Note 5) |
6 | 80,000 | 6/30/2016 | 6% | 11/30/2016 | 10% | 81,713 (Note 6) |
Table (1)
Explanation:
Note 1:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $50,000
Rate of interest = 8%
Period = 9 Months (March 31 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
Note 2:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $50,000
Rate of interest = 8%
Period = 9 Months (March 31 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
Note 3:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $50,000
Rate of interest = 8%
Period = 9 Months (March 31 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
Note 4:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $80,000
Rate of interest = 6%
Period = 6 Months (June 30 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
Note 5:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $80,000
Rate of interest = 6%
Period = 6 Months (June 30 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
Note 6:
Compute the amount of cash proceeds:
Working notes:
Compute the amount of interest on maturity:
Principal = $80,000
Rate of interest = 6%
Period = 6 Months (June 30 to December 31)
Compute the maturity value:
Compute the amount discount on discounting the note:
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Chapter 7 Solutions
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