Question

Proceeds from Notes Payable On September 1, Bella Salon Company issued a 120-day note with a face amount of $67,200 to Hamlet Hair Products Company for merchandise inventory. Assume a 360-day year. a. Determine the proceeds of the note, assuming the note carries an interest rate of 8%. b. Determine the proceeds of the note, assuming the note is discounted at 8%

Answer 1

Face Value $ 67,200 Duration 120 days Rate of Interest -8% а. Interest =67200 120*8% / 360 1,792 Proceeds at issuance date $ 67,200 Proceeds on maturity =67200+1792 68,992 ь. 8% Discount Rate Discount 67200 120 8% / 360 1,792 Proceeds at issuance date =67200-1792 $ 65,408 $ Proceeds on maturity 67,200