92 BOOKKEEPING AND ACCOUNTING

Solution:
(a) $750

14%
14%
14%

60 days
30 days
6 days
96 days

$17.50
8.75
1.75
$28.00

(b) $800

12%
12%

60 days
30 days
90

$16.00
8.00
$24.00

Solved Problem 12.3 A $4,000, 90 day, 14 percent note receivable in

settlement of an account, dated June 1, is discounted at 14 percent on July
1. Compute the proceeds of the note.
Solution:
Principal
$4,000.00
Interest Income (90 days, 14%)
140.00
Maturity Value
$4,140.00
96.60
Discount (60 days, 14% of maturity value)
Proceeds
$4,043.40
Solved Problem 12.4 What are the entries needed to record the infor
mation in Solved Problem 12.3 (a) on June 1? (b) on July 1?
Solution:
(a) Notes Receivable
Accounts Receivable

4,000.00
4,000.00

(b) Cash
Interest Income
Notes Receivable

4,043.40
43.40
4,000.00

Solved Problem 12.5 Bills Bank received a $20,000, 90 day, 14.5 per
cent note from Sun Town Company on account, dated November 1. Sun
Town paid the note on the due date. (a) Show the entries for this transac
tion. (b) Show the adjusting entry assuming December 31 is the last day
of the accounting period?