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Exercise 7 Interest-bearing Note. A company accepted a trade note from AB Merchandising, face value P3,000, 15 percent interest-bearing, dated August 18, maturing in 180 days. Assume 360 days in a year. Required: Sixty days prior to the maturity of the note, the company endorsed the note with recourse (discounted) to YZ Finance Company at a 9 percent annual rate. Compute the following: (a) The company's proceeds from the note. P (b) The company's interest earned (net of discount). P (c) Give the journal entry for the company to record the discounting transaction, assuming that the end of their fiscal year is June 30. The discontinuing is to be recorded as a sale. Assume interest revenue was not recorded before the discounting.

Exercise 7 Interest-bearing Note. A company accepted a trade note from AB Merchandising, face value P3,000, 15 percent interest-bearing, dated August 18, maturing in 180 days. Assume 360 days in a year. Required: Sixty days prior to the maturity of the note, the company endorsed the note with recourse (discounted) to YZ Finance Company at a 9 percent annual rate. Compute the following: (a) The company's proceeds from the note. P (b) The company's interest earned (net of discount). P (c) Give the journal entry for the company to record the discounting transaction, assuming that the end of their fiscal year is June 30. The discontinuing is to be recorded as a sale. Assume interest revenue was not recorded before the discounting.

Corporate Financial Accounting
Corporate Financial Accounting
14th Edition
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter10: Liabilities: Current, Installment Notes, And Contingencies
Section: Chapter Questions
Problem 10.6BE: Journalizing installment notes On the first day of the fiscal year, a company issues 45,000, 8%,...
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Exercise 7 Interest-bearing Note. A company accepted a trade note from AB Merchandising, face value P3,000, 15 percent interest-bearing, dated August 18, maturing in 180 days. Assume 360 days in a year. Required: Sixty days prior to the maturity of the note, the company endorsed the note with recourse (discounted) to YZ Finance Company at a 9 percent annual rate. Compute the following: (a) The company's proceeds from the note. P (b) The company's interest earned (net of discount). P (c) Give the journal entry for the company to record the discounting transaction, assuming that the end of their fiscal year is June 30. The discontinuing is to be recorded as a sale. Assume interest revenue was not recorded before the discounting.
Transcribed Image Text:Exercise 7 Interest-bearing Note. A company accepted a trade note from AB Merchandising, face value P3,000, 15 percent interest-bearing, dated August 18, maturing in 180 days. Assume 360 days in a year. Required: Sixty days prior to the maturity of the note, the company endorsed the note with recourse (discounted) to YZ Finance Company at a 9 percent annual rate. Compute the following: (a) The company's proceeds from the note. P (b) The company's interest earned (net of discount). P (c) Give the journal entry for the company to record the discounting transaction, assuming that the end of their fiscal year is June 30. The discontinuing is to be recorded as a sale. Assume interest revenue was not recorded before the discounting.
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