Question

The notes receivable held by the Tolleson Company on August 3, 2016, are summarized below. On August 4, 2016, Tolleson discounted all of these notes at Neighborhood Bank and Trust at a discount rate of 12 percent. Note No. Date Face Amount Period Interest Rate 31 Apr. 4, 2016 $ 33,000 6 months 10 % 32 June 11, 2016 17,100 120 days 7 % 33 July 31, 2016 14,800 60 days 12 % Compute the net proceeds received from discounting each note. (Use 360 days a year.) Analyze: What is the net interest income or expense to be reported from these transactions assuming all notes are paid when due? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Answer 1.
Note No.	Date	Amount	Interest Rate	Period	Interest Amount	Total Maturity Value	Discount	Discounted Value of Bond
31	4-Apr	33,000.00	10%	6 Month	1,650.00	34,650.00	670.00	33,980.00
32	11-Jun	17,100.00	7%	120 Days	399.00	17,499.00	385.00	17,114.00
33	31-Jul	14,800.00	12%	60 Days	296.00	15,096.00	282.00	14,814.00
Discount = Maturity Value of Bond X Discount Rate X Discount Period
Discount - Note -31 = $34,650 X 12% X 58/180 = $669.90 or say $670 (Apprx.)
Discount - Note -32 = $17,499 X 12% X 66/360 = $384.98 or say $385 (Approx.)
Discount - Note -33 = $15,096 X 12% X 56/360 = $281.79 or say $282
Answer 2.
Note No.	Date	Value of Note	Discounted Value of Bond	Interest Revenue (Expense)
31	4-Apr	33,000.00	33,980.00	980.00
32	11-Jun	17,100.00	17,114.00	14.00
33	31-Jul	14,800.00	14,814.00	14.00