oBook Pint itom Show Me How Proceeds from Notes Payable On September 1, Bella Sa

Question

oBook Pint itom Show Me How Proceeds from Notes Payable On September 1, Bella Salon Company issued a 120-day note with a face amount of $46,800 to Osborne 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 5%. 47,580 X b. Determine the proceeds of the note, assuming the note is discounted at 5%. 46,020 Feedback Check My Work The proceeds equal the cash initially received. Proceeds represents how much in value the borrower is walking away with in cash or merchand se Learning Objective1 Check My Work 1 more Check My Work uses remaining Previous Next All work saved. Email Instructor Save and Exit Submit Assignment for Grading

Explanation / Answer

Answer

A.

The proceeds of the note, assuming the note carries an interest rate of 5%:

Face Value

1.For Bella Salon Company =$46800(Face Value at which the note is issued)

2.For Osborne Hair Products Company = $46800 + ($46800*5%*120/360)

=$46800+$780 =$47580

B.

The proceeds of the note, assuming the note is discounted at 5%:

1.For Bella Salon Company =Present Value of the Face Value at which the note is issued at 5% for 120 days

=$46800 - (46800*5%*120/360)

=$46800 - $780

=$46020

2.For Osborne Hair Products Company = $46800 (at Face value)

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