The notes receivable held by the Tuttle Company on August 3, 2019, are summarized below. On...
The notes receivable held by the Tuttle Company on August 3, 2019, are summarized below. On August 4, 2019, Tuttle discounted all of these notes at Community Bank and Trust at a discount rate of 12 percent.
| Note No. | Date | Face Amount | Period | Interest Rate | ||||||||||
| 31 | Apr. | 4, | 2019 | $ | 33,000 | 6 | months | 10 | % | |||||
| 32 | June | 11, | 2019 | 17,100 | 120 | days | 7 | % | ||||||
| 33 | July | 31, | 2019 | 14,800 | 60 | days | 12 | % | ||||||
Required:
Compute the net proceeds received from discounting each note.
Analyze:
What is the net interest income or expense to be reported from
these transactions assuming all notes are paid when due?
Homework Answers
Answer:
Note : 31
| Face value | 33000 | |
| Maturity value of the note | 34650 | 33000+33000*10%*6/12 |
| Interest revenue | 550 | 33000*10%*4/12*1/2 |
| Discount | 693 | 34650*12%*2/6*1/2 |
| Notes Face value + Interest Earned | 33550 | 33000+550 |
| Discounted Value of Note | 33957 | 34650-693 |
| Interest Expense | -407 | 33550-33957 |
| Net Proceeds received from discounting note | 33957 |
Note : 32
| Face value | 17100 | |
| Maturity value of the note | 17494 | 17100+17100*7%*120/365 |
| Interest revenue | 176 | 17100*7%*54/365 |
| Discount | 380 | 17494*12%*66/365 |
| Notes Face value + Interest Earned | 17276 | 17100+176 |
| Discounted Value of Note | 17114 | 17494-380 |
| Interest Expense | 162 | 17276-17114 |
| Net Proceeds received from discounting note | 17114 |
Note : 33
| Face value | 14800 | |
| Maturity value of the note | 15092 | 14800+14800*12%*60/365 |
| Interest revenue | 19 | 14800*12%*4/365 |
| Discount | 278 | 15092*12%*56/365 |
| Notes Face value + Interest Earned | 14819 | 14800+19 |
| Discounted Value of Note | 14814 | 15092-278 |
| Interest Expense | 5 | 14819-14814 |
| Net Proceeds received from discounting note | 14814 |
Total Interest income =745
less: Interest Expense =-(240)
Net Interest income =985
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