Acct. 2-Ch. 4 Discounting Notes Receivable

There is no risk involved when discounting a note receivable.

• True
• False

A Dishonored Note is a note which has been taken to a bank prior to it's maturity date, in an effort to gain cash quickly.

• True
• False

What is the very first thing that you need to calculate for the bank discount amount?

• Maturity Value
• Interest on the note.
• Proceeds of the note.
• Discount period.

A contingent responsibility occurs when the payee discounts a note.

• True
• False

The equation to calculate the bank discount is:

• Maturity Value + Discount Rate + Discount Period =
• Maturity Value - Bank Discount =
• Maturity Value X Discount Rate X Discount Date =
• Maturity Value X Discount Rate X Discount Period.

A note is issued on May 2 for $11,500  with 120-day terms at 6.75%.  On July 15, the payee discounts the note for 5%.  What is the maturity date of the note?

• August 30
• November 12
• September 1
• August 31

A note is issued on May 2 for $11,500  with 120-day terms at 6.75%.  On July 15, the payee discounts the note for 5%.  What is the maturity value of the note?

• 11500
  11500
• $255.21
• 11755.21
• 11274.79

A note is issued on May 2 for $11,500  with 120-day terms at 6.75%.  On July 15, the payee discounts the note for 5%.  What is the discount period of the note?

• 64 days
• 74 days
• 46 days

A note is issued on May 2 for $11,500  with 120-day terms at 6.75%.  On July 15, the payee discounts the note for 5%.  What is the bank discount on the note?

• $74.07
• $72.47
• $255.21
• $11,425.93

A note is issued on May 2 for $11,500  with 120-day terms at 6.75%.  On July 15, the payee discounts the note for 5%.  What are the proceeds on the note?

• $11,829.28
• $11,681.14
• $11,755.21