James Howard owns Howard Auto Sales. He periodically borrows money from Bay City State Bank and Trust. He permits some customers to sign short-term notes for their purchases. He usually discounts these notes at the bank. Following are selected transactions that occurred in March 20X1. DATE TRANSACTIONS20X1 Mar.4 Mr. Howard borrows $20,000 from the bank on a note payable for the business. Terms of the note are 8 percent interest for 45 days. 11 A 90-day $18,000 note payable to the bank is discounted at a rate of 10 percent. 22 Sold a car to Darnell Jones for $30,000 on a 75-day note receivable, bearing interest at 10 percent. 23 Discounted the Jones note with the bank. The bank charges a discount rate of 12 percent. 25 Sold a car for $30,000 to Henry Thomas. Thomas paid $4,000 cash and signed a 30-day note, bearing interest at 10 percent, for the balance. 28 Alfred Herron's account receivable is overdue. Howard requires him to sign a 12 percent, 30-day note for the balance of $11,000.Additional DataHoward pays all the company’s notes payable on time.Darnell Jones defaults on his $30,000 note and the bank charges the company’s checking account for the maturity value of the note and a service fee of $60.Henry Thomas pays his note on time.Alfred Herron pays his note on time.Record discount of note payable in the table below.dategeneral journaldebitcreditMar. 11, 20X1

Introduction: Journal: Recording of a business transactions in a chronological order. First step in the preparation of final accounts is recording journals.March 11 - A 90-day $18,000 note payable to the bank is discounted at a rate of 10 percent. Principal note value = 18000 Interest amount = 18000 x 10 % x ( 90 / 365 ) = 1800 x ( 90 / 365 ) = 443.83 Maturity value = 18000 +443.83 = $ 18443.83 Discounted to bank = 18443.83 x 10 % x ( 90 / 365 ) = 1844.3 x ( 90 / 365 ) = 454.75 Discount amount = 454.75 Cash = Maturity value - Discount = 18443.83 - 454.75 = 17989.08

Answered: James Howard owns Howard Auto Sales. He…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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James Howard owns Howard Auto Sales. He periodically borrows money from Bay City State Bank and Trust. He permits some customers to sign short-term notes for their purchases. He usually discounts these notes at the bank. Following are selected transactions that occurred in March 20X1.

DATE		TRANSACTIONS
20X1
Mar.	4		Mr. Howard borrows $20,000 from the bank on a note payable for the business. Terms of the note are 8 percent interest for 45 days.
	11		A 90-day $18,000 note payable to the bank is discounted at a rate of 10 percent.
	22		Sold a car to Darnell Jones for $30,000 on a 75-day note receivable, bearing interest at 10 percent.
	23		Discounted the Jones note with the bank. The bank charges a discount rate of 12 percent.
	25		Sold a car for $30,000 to Henry Thomas. Thomas paid $4,000 cash and signed a 30-day note, bearing interest at 10 percent, for the balance.
	28		Alfred Herron's account receivable is overdue. Howard requires him to sign a 12 percent, 30-day note for the balance of $11,000.

Additional Data

Howard pays all the company’s notes payable on time.
Darnell Jones defaults on his $30,000 note and the bank charges the company’s checking account for the maturity value of the note and a service fee of $60.
Henry Thomas pays his note on time.
Alfred Herron pays his note on time.

Record discount of note payable in the table below.

date	general journal	debit	credit
Mar. 11, 20X1

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