Question 1

Notes Payable is a formal promise to pay.

Accepted Answer

Notes Payable is a formal written agreement where the borrower agrees to pay back the lender a specific amount of money at a future date or on demand.

Question 2

The interest payment for a $24,000, 84-day note at 8% interest is $24,448.

Accepted Answer

The interest payment is calculated using the formula: Interest = Principal x Rate x Time. For a $24,000 note at 8% annual interest for 84 days (84/365 year), the interest is $24,000 x 0.08 x (84/365) = $552.33, not $24,448.

Question 3

On April 4, Noreen Cox negotiated a $14,000 bank loan for 240 days at an interest rate of 6%.
Required (show your calculations):
a) Determine the maturity date of the note.
b) Calculate the amount of interest charged by the bank.

Accepted Answer

The answer of On April 4, Noreen Cox negotiated a...

Question 4

Scott Moore is considering accepting a $10,000, 60-day, 12% promissory note from Cory Gregor to extend additional time to settle a past-due account. Discuss some of the reasons why Moore would accept a promissory note from Cory Gregor.

Accepted Answer

The answer of Scott Moore is considering accepting a $10,000,...

Question 5

The maturity date of a 60-day note dated March 8 is May 8.

Accepted Answer

The maturity date of a 60-day note dated March 8 is actually May 7, because you count 60 days starting from March 9.

Question 6

The interest payment for a $17,000, 67-day note at 10% interest is $316.39.

Accepted Answer

The interest payment is calculated as follows:Interest = Principal x Rate x TimeInterest = $17,000 x 10% x 67 days / 360 daysInterest = $17,000 x 0.10 x 67 / 360Interest = $316.39

Question 7

The maturity date for a four-month note dated May 31 is:

Accepted Answer

A four-month note dated May 31 matures on September 30, as four months from May 31 is the end of September.

Question 8

In the interest calculation formula, time is expressed:

Accepted Answer

Time in interest calculation formulas can be expressed in years or fractions of a year to accommodate various loan or investment durations.

Question 9

Find the maturity dates for the following:
a) A 95-day note dated February 18, no leap year.
b) A 5-month note dated June 30.
c) A 1-year note dated April 10, 2018.

Accepted Answer

The answer of Find the maturity dates for the following:
a)...

Question 10

The formula for calculating interest on a note is: principal × rate × time.

Accepted Answer

The formula for calculating simple interest on a note is indeed principal × rate × time, where the principal is the initial amount of money, the rate is the interest rate per period, and time is the number of time periods.

Question 11

A 90-day note dated July 9 would be due on October 7.

Accepted Answer

A 90-day note is due 90 days after the date of issue. July 9 + 90 days = October 7.

Question 12

The payee is the party to whom the note is payable.

Accepted Answer

The payee is indeed the party to whom the note is payable, meaning they are the recipient of the payment specified in the note.

Question 13

A $10,000, 5% note is dated July 6 and is due in 120 days. Using a 360-day year, the interest payment would be: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

The interest payment can be calculated using the formula: Interest = Principal × Rate × Time. Here, Principal = $10,000, Rate = 5% (or 0.05 as a decimal), and Time = 120/360 (since a 360-day year is used). So, Interest = $10,000 × 0.05 × (120/360) = $166.67, which rounds to $167.

Question 14

Calculate the simple interest for the following:
a) $13,500, 11%, 112 days
b) $8,200, 6%, 5 months
c) $19,250, 7.5%, 1 year

Accepted Answer

The answer of Calculate the simple interest for the following:
a)...

Question 15

A note is also called a promissory note.

Accepted Answer

A note, in financial terms, is indeed also referred to as a promissory note, which is a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date.

Question 16

The due date of a promissory note is the maturity date.

Accepted Answer

The due date of a promissory note, also known as the maturity date, is the specific date on which the borrower is obligated to pay back the principal amount borrowed, along with any interest or fees, to the lender.

Question 17

Interest due on a $7,000, 10%, 9-month note is:

Accepted Answer

The interest on a note is calculated using the formula: Interest = Principal × Rate × Time. Here, Principal = $7,000, Rate = 10% (or 0.10), and Time = 9/12 year (since it's for 9 months). So, Interest = $7,000 × 0.10 × (9/12) = $525.

Question 18

Millionaires Bank accepts a promissory note for $4,000 from a customer on February 1, to be repaid in eight months plus 8% interest. The interest due on the note is: (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Accepted Answer

Interest = Principal x Rate x Time= $4,000 x 8% x 8/12= $4,000 x 0.08 x 2/3= $213.33= $213 (rounded to the nearest dollar)

Question 19

The maker accepts payment on a note from a payee.

Accepted Answer

The maker of a note is the party who promises to pay the amount specified in the note, while the payee is the party to whom the payment is to be made. The maker does not accept payment; they make the payment.

Question 20

The maturity date during a leap year for a 95-day note dated February 2 is:

Accepted Answer

To calculate the maturity date of a 95-day note dated February 2 during a leap year, we start by recognizing that February has 29 days in a leap year. From February 2, there are 28 days left in February. This leaves 67 days (95 - 28) to be counted from March 1. March and April have 31 and 30 days, respectively, totaling 61 days. This leaves 6 days into May, so the maturity date is May 7.

Quiz 14: Notes Receivable and Notes Payable