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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Determine due date and interest on notes

Determine the due date and the amount of interest due at maturity on the following notes:

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*Assume that February has 28 days.

To determine

Note receivable:

Note receivable refers to a written promise received by the creditor from the debtor in formal, for the amounts to be settled within a stipulated period of time. This written promise is issued by a debtor or borrower to the lender or creditor. Notes receivable is an asset of a business. Notes receivable often used for the credit periods of more than 60 days.

Due date:

Due date is the maturity date on note, on due date the borrower is supposed to repay the face value of the note along with interest.

Interest on note:

Interest on note is the amount charged on the principal value of note for the privilege of borrowing money. Interest is to be paid by the borrower and to be received by the lender.

To determine: The due date and the amount of interest due at maturity.

Explanation

Determine the due date and the amount of interest due at maturity.

  Due date Amount of interest due at maturity
a. April 10 $500
b. September 15 $720
c. July 5 $525
d. December 7 $270
e. January 19 $180

Table (1)

Working note:

a.

Determine the due date for the note issued on April 10, whose term period is 90 days.

The due date of the note is calculated as follows:

Particulars Days
Number of days from January 10 to 31 22 days
Number of days from February 1 to 28 28 days
Number of days from March 1 to 30 30 days
Number of days from April 1 to 10 10 days
Total 90 days

Table (2)

Calculate the amount of interest due at maturity.

Total interest=[Face amount ×Annual interest rate×Time in terms of year]=[$40,000×5%100×90 days360 days]=$500

b.

Determine the due date for the note issued on March 19, whose term period is 180 days.

The due date of the note is calculated as follows:

Particulars Days
Number of days from March 20 to 31 12 days
Number of days from April 1 to 30 30 days
Number of days from May 1 to 31 31 days
Number of days from June 1 to 30 30 days
Number of days from July 1 to 31 31 days
Number of days from August 1 to 31 31 days
Number of days from September 1 to 15 8 days
Total 180 days

Table (3)

Calculate the amount of interest due at maturity.

Total interest=[Face amount ×Annual interest rate×Time in terms of year]=[$18,000×8%100×180 days360 days]=$720

c.

Determine the due date for the note issued on June 5, whose term period is 30 days.

The due date of the note is calculated as follows:

Particulars Days
Number of days from June 6 to 30 25 days
Number of days from July 1 to 5 5 days
Total 30 days

Table (4)

Calculate the amount of interest due at maturity

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