1.)Birch Co. received a $2, 600 , 5.0 %, 45 -day note from Orange Co. dated Sept
ID: 2743494 • Letter: 1
Question
1.)Birch Co. received a $2, 600 , 5.0 %, 45 -day note from Orange Co. dated September 6. On September 25 Birch discounted the note at Faithful Bank, which charged a discount rate of 7.0 %. Calculate the following: (3 points)
a. Maturity value $?
b. Discount period is ? days
c. Bank discount $?
d. Proceeds $?
(Assume a 360-day year. Round any calculations to the nearest cent)
2.)
Find the maturity value of the following
a.) $9100 10% 8 months
b.) $1200 5% 105 days
(Assume a 360-day year. Round total interest to the nearest cent.) ( 1 point)
3.)
calculate the interest for the following: ( 3 points)
a.) $14,000 5% 3 years
b.) $26,000 13% 5 months
c.) $7,000 15% 100 days
4.) Jack Co. received a $ 2,300 , 5.0 %,45 day note from Nate Co. dated June 6. On June 30 Jack discounted the note at Save Bank, which charged a discount rate of 7.0
%.The maturity value is $ 2,314.38 the bank discount is $ 9.45, and the proceeds are $ 2,304.93 Journalize the discounted note for Jack Co. (Assume a 360-day year. Round any calculations to the nearest cent. Record debits first, then credits. Explanations are not required.) (3 points)
Debit Credit
Cash 2304.93
Notes receivable ???
Interest income ???
Explanation / Answer
1.
a.
Maturity value = Principal + [Principal x interest rete x (Term of note / Number of days in a year)]
= $2,600 + [$2,600 x 5% x (45/360)]
= $2616.25
b. Discout period = Term of note - Number of days from Sept. 6 to Sept. 25
= 45 days - 20 days
= 25 days
c. Bank discount = Principal x discount factor
= $2,600 x 0.99515
= $12.61
d. Proceeds = Principal - discount
= $2,600 - $12.61
= $2,587.39
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