On October 1, Martin corporation sold 10,000 of merchandise to Robin corporation on account. Payment was...
On October 1, Martin corporation sold 10,000 of merchandise to Robin corporation on account. Payment was due on October 31. On October 31, Martin accepted a $10,000, 6 percent, 60-day note in settlement of its account. On November 30, Robin discounted this note at a local bank at 6 percent.
- What amount of proceeds is Martin due from the bank when the note is discounted?
Homework Answers
Value of note = $10000
Discount rate = 6%
Net proceeds from the bank = $10000 - ($10000*6%)
= $10000 - $600 = $9400.
Net due from = Value of Note + Interest
= $10000 + ($10000*6%)*60/360
= $10000 + $600 *60/360
= $10000 + $100
= $10100.
Note: We assume that 360 days in a year.
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