Notes Receivable Georgia CTAE Resource Network Instructional Resources Office Written by: Dr. Marilynn K. Skinner May 2009.

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Notes Receivable and Notes Payable

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Notes Receivable Georgia CTAE Resource Network Instructional Resources Office Written by: Dr. Marilynn K. Skinner May 2009

Calculating the Maturity Value Maturity Value = Principal + Interest Interest = Principal X Interest Rate X Time (I = P X R X T)

Calculating the Maturity Value Example: Note Face Value: $ Interest Rate: 12% Issue Date: May 16 Due Date: August 14 Interest = Principal X Interest Rate X Time (I = P X R X T) P = 1800 R =.12 T = 60/365 I = 1800 X.12 X 60/365 I =35.51

Calculating the Maturity Value Maturity Value = Principal + Interest Maturity Value = $ Maturity value = $

Discounting Notes Receivable Step 1 Calculate discount period: Number of days in term of note – Number of days business held the note. Example: Previous note discounted on May 31. Term of Note = 90 days Held by business = 15 days Discount Period = = 75 days

Discounting Notes Receivable Step 2 Calculate the discount amount Maturity Value X Discount Rate X Discount Period Maturity Value: Discount rate: 12.5% (given) Discount Period: 75/365 Amt of Discount = X.125X75/365= $47.14

Discounting Notes Receivable Step 3 Calculate the proceeds Proceeds = Maturity Value – Discount Amount Proceeds = $ $47.14 = $

You try it! Johnson Company accepted a note from Jane Richards. The terms of the note were as follows; Principal = $2000 Interest Rate = 8.5% Term of the note = 6 months After 1 month Johnson discounted the note to the bank at 9%. Calculate the maturity value of the note and the proceeds from the discount

Answer Maturity value = $2000 X.085 X 6/12 = $85.00 $ $85.00 = $ Discount $2085 X.09 X 5/12 = Proceeds $ $78.19 = $