Due date for note receivable is March 22 = Jan 21 + 60 days
Number of days to be considered while calculating discount = Feb
10 to March 22 = 40 days = 1.33 months
Discount calculated by bank for the period left to lapse till
due date = 0.08*10100*1.33/12 = $90
Workings for the journal entry are as under:-
|
Item |
Amount in $ |
Calculation detail |
|
|
|
|
|
Face value |
10000 |
|
|
Interest |
100 |
10000*6%*2/12 |
|
maturity value |
10100 |
Face value + Interest |
|
|
|
|
|
Discount calculated |
90 |
0.08*10100*1.33/12 |
|
Proceeds from note |
10010 |
Maturity value less discount |
|
Net interest income |
10 |
Proceeds from note minus face value |
Journal entry to be done on Feb 10:-
|
Item |
Debit |
Credit |
|
Cash A/c |
10010 |
|
|
Notes receivable |
|
10000 |
|
Interest income |
|
10 |
