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note at a 6.5% discount. (L 's receive?

note at a 6.5% discount. (L 's receive?

FINANCIAL ACCOUNTING
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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Robinson's, an electrical supply company, sold $7,600 of equipment to Jim Coates Wiring, Incorporated Coates signed a promissory note May 12 with 4.8% interest. The due date was August 10. Short of funds, Robinson's contacted Capital One Bank on July 20; the bank agreed to take over the note at a 6.5% discount. (Use Days in a year table.) What proceeds will Robinson's receive? Note: Use 360 days a year. Do not round intermediate calculations. Round your final answer to the nearest cent. Proceeds received
Transcribed Image Text:Robinson's, an electrical supply company, sold $7,600 of equipment to Jim Coates Wiring, Incorporated Coates signed a promissory note May 12 with 4.8% interest. The due date was August 10. Short of funds, Robinson's contacted Capital One Bank on July 20; the bank agreed to take over the note at a 6.5% discount. (Use Days in a year table.) What proceeds will Robinson's receive? Note: Use 360 days a year. Do not round intermediate calculations. Round your final answer to the nearest cent. Proceeds received
Expert Solution
Step 1

Answer :

The days are May 12 to Aug 10

= (31-12) days may + 30days of June+31 days July + 10 Days Aug.

= 19+30+31+10

= 90 Days 

Interest = $7600*4.8%*90/360

= $91.2

Maturity value = $7600+$91.2

= $7691.2

Discount period = 90 -( (31-12)+30+20)

= 21 Days

Bank discount = $7691.2 * 6.5%*21/360

= $29.16

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