Question

Proceeds from Notes Payable On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $150,000. Assume a 360-day year. Required:
(a) Determine the proceeds of the note, assuming that the note carries an interest rate of 10%.
(b) Determine the proceeds of the note, assuming that the note is discounted at 10%.

Answer 1

Answer:

a) $1,875

b) $ 2,083

Explanation:

a) Notes Payable         $150,000  

Interest Rate (10%)         $15,000  

Proceeds from Note $1,875  -  15000/8

   

b) Notes Payable         $150,000  

Discount Factor (10%) $166,667  

Finance Cost                 $16,667  

Proceeds from Note $2,083.33   -   16667/8