5721a Discounting Notes Receivable Solution PDF

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Discounting Notes Receivable:[5721a] SOLUTION Jennifer had an interest-bearing note receivable in the face amount of $12,000 that was created on May 1, Year 1. The note was the result of a sales transaction by Jennifer in the amount of $12,000. The note’s interest rate and due date were 7% and December 1, Year 1, respectively. Jennifer’s banker agreed to discount the note on July 1, Year 1. The banker’s discount rate was 9%. Required: What journal entry would Jennifer make on July 1, Year 1, when the banker accepted the note and paid Jennifer the proceeds from the discounting transaction? Maturity Value: $12,490 [12,000 x 7% x 7/12 = $490] $12,490 x 9% x 5/12 = $468 ‘the banker’s interest’ $12,490 - $468 = $12,022 proceeds to Jennifer Jennifer’s JE: Debit Cash $12,022. Credits to Int Rev and NR for $22 and $12,000, respectively. Jose had an interest-bearing note receivable in the face amount of $14,000 that was created on February 1, Year 1. The note was the result of a sales transaction by Jose in the amount of $14,000. The note’s interest rate and due date were 9% and November 1, Year 1, respectively. Jennifer’s banker agreed to discount the note on May 1, Year 1. The banker’s discount rate was 6%. Required: What journal entry would Jose make on July 1, Year 1, when the banker accepted the note and paid Jose the proceeds from the discounting transaction? Maturity Value: $14,945 [$14,000 x 9% x 9/12 = $945] $14,945 x 6% x 6/12 = $448 ‘the banker’s interest’ $14,945 - $448 = $14,497 proceeds to Jose Jose’s JE: Debit Cash $14,497. Credits to Int Rev and NR for $497 and $14,000, respectively. Mwh 031619...