Proceeds from Notes PayableOn May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 120-day note with a face amount of $63,600. Assume a 360-day year.Required:a. Determine the proceeds of the note, assuming the note carries an interest rate of 9%.$b. Determine the proceeds of the note, assuming the note is discounted at 9%.$

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Asked Oct 25, 2019
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Proceeds from Notes Payable
On May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 120-day note with a face amount of $63,600. Assume a 360-day year.
Required:
a. Determine the proceeds of the note, assuming the note carries an interest rate of 9%.
$
b. Determine the proceeds of the note, assuming the note is discounted at 9%.
$

 

 

 

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Expert Answer

Step 1

Notes payable is a liability account. It records the face value of the promissory notes that a company issues. It shows the amount that a company must pay to others.

Step 2

Given:

Face value of note: $63,600

Note is issued for 120 days.

Interest rate: 9%

Part (a)

Calculation of note proceed at interest rate of 9% is:

Note proceeds at interest rate of 9% will be equal to the face value of the note issued. So, note proceeds is $63,600.

Step 3

Face value of note : $63,600

Discount rate : 9%

Note period is 120 days.

Days in a year is 3...

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note period Note proceeds face value -face value x discount rate x- days in a year 120 = $63,600-$63, 600 x 9% x- 360 $63,600-$1,908 $61,692

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