Question

Proceeds from Notes Payable

On May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 60-day note with a face amount of $78,000. Assume a 360-day year.

Required:

a. Determine the proceeds of the note, assuming the note carries an interest rate of 5%.
$

b. Determine the proceeds of the note, assuming the note is discounted at 5%.
$

2.

Bob Dunn's weekly gross earnings for the present week were $2,250. Dunn has two exemptions. Using the wage bracket withholding table in Exhibit 2 with a $75 standard withholding allowance for each exemption, what is Dunn's federal income tax withholding? Round your answer to two decimal places.

3.

Employee Net Pay

Kenneth Friedman's weekly gross earnings for the week ended April 22 were $1,000, and his federal income tax withholding was $180. Assuming the social security rate is 6% and Medicare is 1.5%, what is Kenneth's net pay?

Note: If required, round your answer to two decimal places.
$

Answer 1

Part-(a): When the note carries an interest rate of 5%, Maynard Co. would receive full amount that is equal to note's face value. That is, irrespective rate of interest, Maynard Co. will receive face value of the note as the proceeds at the time of signing the note. At the maturity. Maynard Co.must repay note's face value plus accrued interest @ 5% for 60 days. Therefore, The proceeds of the note, assuming the note carries an interest rate of 5% $78,000 Part-(bl: When the note is discounted at 5%, Maynard Co. will receive an amount that is equal to discounted face value at today's hbut for 60 days effectively. Therefore, Nominal annual interest rate # of days in a year Note's terms to maturity, days Nominal interest rate for 60 days Face value of the note The proceeds of the note, assuming the note is discounted at 5% $77,355.37 ($78,000 / ( 1 + 0.3333%)-$78,000 / ( 1 + 0.008333)-$78,000 / 1.008333-$77,355.37 5% 360 60 0.833396 $78,000 [(5%/360) x 60]