On June 8, Williams Compa earest dollar. a. $83,560 b. $75,964 Oc. $7,596 d$78.496
On June 8, Williams Compa earest dollar. a. $83,560 b. $75,964 Oc. $7,596 d$78.496
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Understanding Note Payables: A Calculation Exercise**
**Question:**
On June 8, Williams Company issued a $75,964, 10%, 120-day note payable to Brown Industries. Assuming a 360-day year for your calculations, what is the maturity value of the note? When required, round your answer to the nearest dollar.
**Options:**
- a. $83,560
- b. $75,964
- c. $7,596
- d. $78,496
To solve this, we need to calculate the interest accrued over the 120-day period and add it to the principal amount of the note. Use the following formula to find the interest:
**Interest = Principal x Rate x Time**
Where:
- Principal = $75,964
- Rate = 10% (expressed as 0.10)
- Time = 120/360 (since the problem states to use a 360-day year)
Let's calculate step-by-step:
1. **Calculate the time period in years:**
\[
\text{Time} = \frac{120 \text{ days}}{360 \text{ days/year}} = \frac{1}{3} \text{ years}
\]
2. **Calculate the interest:**
\[
\text{Interest} = 75,964 \times 0.10 \times \frac{1}{3} = 75,964 \times 0.10 \times 0.3333 = 2,532.13
\]
3. **Calculate the maturity value (Principal + Interest):**
\[
\text{Maturity Value} = 75,964 + 2,532.13 = 78,496.13
\]
Rounding to the nearest dollar, we get $78,496.
**Answer:**
d. $78,496](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4f7f7e91-311f-40b2-8ef2-058480eb16a0%2Ffc2d40d6-ded4-4019-949b-04f926f1d7a2%2Fqlr53kf_processed.png&w=3840&q=75)
Transcribed Image Text:**Understanding Note Payables: A Calculation Exercise**
**Question:**
On June 8, Williams Company issued a $75,964, 10%, 120-day note payable to Brown Industries. Assuming a 360-day year for your calculations, what is the maturity value of the note? When required, round your answer to the nearest dollar.
**Options:**
- a. $83,560
- b. $75,964
- c. $7,596
- d. $78,496
To solve this, we need to calculate the interest accrued over the 120-day period and add it to the principal amount of the note. Use the following formula to find the interest:
**Interest = Principal x Rate x Time**
Where:
- Principal = $75,964
- Rate = 10% (expressed as 0.10)
- Time = 120/360 (since the problem states to use a 360-day year)
Let's calculate step-by-step:
1. **Calculate the time period in years:**
\[
\text{Time} = \frac{120 \text{ days}}{360 \text{ days/year}} = \frac{1}{3} \text{ years}
\]
2. **Calculate the interest:**
\[
\text{Interest} = 75,964 \times 0.10 \times \frac{1}{3} = 75,964 \times 0.10 \times 0.3333 = 2,532.13
\]
3. **Calculate the maturity value (Principal + Interest):**
\[
\text{Maturity Value} = 75,964 + 2,532.13 = 78,496.13
\]
Rounding to the nearest dollar, we get $78,496.
**Answer:**
d. $78,496
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