Question

In: Accounting

Hafers, an electrical supply company, sold $5,000 of equipment to Jim Coates Wiring, Inc. Coates signed...

Hafers, an electrical supply company, sold $5,000 of equipment to Jim Coates Wiring, Inc. Coates signed a promissory note May 12 with 4.8% interest. The due date was August 10. Short of funds, Hafers contacted Charter 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 Hafers receive? (Use 360 days a year. Do not round intermediate calculations. Round your final answer to the nearest cent.)

Proceeds received

Expert Solution

Proceeds Received by Hafers=$5,041

Solution:

Days between May 12 to May 31st = 19

Days in June=30

Days in July = 31

Days in August = 10

Total Days=19+30+31+10=90

Loan Interest = $5,000 * 90 * 4.8

360*100

=2,160,000

36000

=$60

Total Amount due = Face Value+Loan Interest

=$5,000+$60

=$5,060

Now the days left in maturity are given as:

Days between July 20 and August 10 = 21 days

Total Number of Days in the year is =360

Rate of Discount = 6.5%

Discount by bank = $5,060*21*6.5

100*360

=$690,690

36000

=$19.19

Net Value of the Note =Amount Due - Discount

=$5,060 - $19.19

= $ 5,040.81

= $5,041 (rounded)

Proceeds Received by Hafers= $5,041

ekkarill92 answered 2 years ago

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