PE 11-1A Proceeds from notes payable

On September 1, Rongo Co. issued a 45-day note with a face amount of $80,000 to Simone Co. for merchandise inventory.

a. Determine the proceeds of the note, assuming the note carries an interest rate of 8%.
b. Determine the proceeds of the note, assuming the note is discounted at 8%.

Answer:
a. $80,000
b. $79,200 [$80,000 – ($80,000 × 45/360 × 8%)]

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