Summerz Company granted an extension on an open account by accepting a 30-day note for $7,000 dated June 20, from SunnyView Company. To raise cash, Summerz sold the note to a bank on June 29. The days held by endorser and the discount period of the note is:
A) 9 days and 21 days, respectively.
B) 21 days and 9 days, respectively.
C) 8 days and 22 days, respectively.
D) 10 days and 20 days, respectively.

Question

Summerz Company granted an extension on an open account by accepting a 30-day note for $7,000 dated June 20, from SunnyView Company. To raise cash, Summerz sold the note to a bank on June 29. The days held by endorser and the discount period of the note is:​
A) ​9 days and 21 days, respectively.
B) ​21 days and 9 days, respectively.
C) ​8 days and 22 days, respectively.
D) ​10 days and 20 days, respectively.

Quizplus · Accepted Answer

The days held by endorser are calculated from the date of the note (June 20) to the date it was sold (June 29). Therefore, the endorser held the note for 9 days.

To calculate the discount period, we need to subtract the credit period (30 days) from the term of the note (30 days). This gives us 0 days, which means that the note was due at maturity.

Since the bank purchased the note on June 29, they held it for the remaining 30 days - 9 days already held by the endorser = 21 days.

Therefore, the discount period is 21 days and the answer is choice A.

Summerz Company Granted an Extension on an Open Account by Accepting