Question

Computing the Proceeds from the Sale of Notes Receivable

Below are several customer notes receivable that were sold without recourse.

1. An $8,000, 60-day, non-interest-bearing note sold after 15 days at 12%.
2. A $10,000, 12%, 60-day note sold after 30 days at 14%.
3. A $4,000, 10%, 90-day note sold after 30 days at 12%.
4. A $10,000, 12%, 120-day note sold after 45 days at 15%.

Required:

Determine the proceeds from each of the preceding sales of customer notes receivable. (Assume a 360-day year.) Do not round intermediate calculations. When required, round your final answers to the nearest dollar. If an amount is zero, enter "0".

	Note 1	Note 2	Note 3	Note 4
Face Value of Note
Interest to Maturity
Maturity Value
Discount
Proceeds

Answer 1

1. An $8,000, 60-day, non-interest-bearing note sold after 15 days at 12%.
2. A $10,000, 12%, 60-day note sold after 30 days at 14%.
3. A $4,000, 10%, 90-day note sold after 30 days at 12%.
4. A $10,000, 12%, 120-day note sold after 45 days at 15%

Assume a 360-day year

Particulars	Note 1	Note 2	Note 3	Note 4
Face Value of Note	8000	10000	4000	10000
Interest to Maturity = [ Face value of note * Interest rate * Time ]	0	200	100	400
	[ 10000 * 12% * ( 60 / 360 )]	[ 4000 * 10% * ( 90 / 360 )]	[ 10000 * 12% * ( 120 / 360 )]
Maturity Value = [ Face value of note + Interest to Maturity ]	8000	10200	4100	10400
[ 8000 + $0 ]	[ 10000 + 200 ]	[ 4000 + 100 ]	[ 10000 + 400 ]
Discount = [ Maturity value * Discount rate * Discount period ]	120	119	82	325
[ 8000 * 12% * ( (60 - 15) / 360 )]	[ 10200 * 14% * (( 60 - 30) / 360 )]	[ 4100 * 12% * ( (90 - 30) / 360 )]	[ 10400 * 15% * ( (120 - 45) / 360 )]
Proceeds = [ Maturity Value - Discount ]	7880	10081	4018	10075
[ 8000 - 120 ]	[ 10200 -119 ]	[ 4100 - 82 ]	[ 10400 - 325 ]