   Chapter 6, Problem 18E ### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

#### Solutions

Chapter
Section ### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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# Computing the Proceeds from the Sale of Notes Receivable Below are several customer notes receivable that were sold without recourse. 1. An $8,000, 60-day, non-interest-bearing note sold after 15 days at 12%. 2. A$9,000, 12%, 60-day note sold alter 30 days at 14% 3. A $6,000, 10%, 90-day note sold after 30 days at 12% 4. A$10,000, 12%, 120-day note sold after 45 days at 15% Determine the proceeds from each of the preceding sales of customer notes receivable. (Assume a 360-day year.)

To determine

Calculate the preceding sales of customer notes receivable by assuming that there are 360 days in a year.

Explanation

Calculate the preceding sales of customer notes receivable by assuming that there are 360 days in a year.

 Particulars Transaction  1 Transaction  2 Transaction 3 Transaction  4 Face value of note $8,000.00$9,000.00 $6,000.00$10,000.00 Interest to maturity $0.00 (2)$180.00 (4) $150.00 (6)$400.00 Maturity value $8,000.00$9,180.00 $6,150.00$ 10,400.00 Discount (1)  $(120.00) (3)$(107.10) (5) $(123.00) (7)$(325.00) Proceeds $7,880.00$  9,072.90 $6,027.00$ 10,075.00

(Table 1)

Working note:

(1) Calculate the discount value for the transaction 1:

Discount = (Accounts receivable × Interest rate on sale of note)×(Time periodNote being sold after )360=$8,000×12%×6015360=$8,000×12%×45360=$120 (2) Calculate the interest on maturity for the transaction 2: Interest on maturity =Accounts receivable ×Interest percentage×Time period=$9,000×12%×60360=$180 (3) Calculate the discount value for the transaction 2: Discount = (Maturity value × Interest rate on sale of note)×(Time periodNote being sold after )360=$9,180×14%×6030360=$9,180×14%×30360=$107

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