On June 30, 2007, Simon Company discounted a customer’s $180,000, 6-month, and 10 percent note receivable dated April 30, 2007. A discount rate of 12 percent was charged by the bank. Simon’s proceeds from this discounted note would be:
Please tell me how do i calculate this problem.
To calculate the proceeds from a discounted note, you need to consider the face value of the note, the discount rate, and the time period.
In this case, the face value of the note is $180,000, the discount rate is 12%, and the time period is 6 months. To calculate the discount amount, you need to multiply the face value of the note by the discount rate and the time period:
Discount Amount = Face Value × Discount Rate × Time
Plugging in the given values:
Discount Amount = $180,000 × 12% × 6/12 years
Simplifying the equation:
Discount Amount = $180,000 × 0.12 × 0.5
Calculating the Discount Amount:
Discount Amount = $10,800
To find the proceeds, subtract the discount amount from the face value of the note:
Proceeds = Face Value - Discount Amount
Proceeds = $180,000 - $10,800
Calculating the Proceeds:
Proceeds = $169,200
So, Simon's proceeds from this discounted note would be $169,200.