Question

Harmon Sporting Goods received a $60,000, 6-month, 10% note from a customer, four months after receiving the note, it was discounted at a local bank at a 12% discount rale. The cash proceeds received Harmon were:_______.
a) $63,000
b) $64,680
c) $61,740
d) $67,200

Answer 1

Answer:

c) $61,740

Explanation:

The computation of the cash proceeds received is shown below:

= Cash received + interest received for six months - discount expenses

where,

Cash received is $60,000

Interest received for four months would be

= $60,000 × 10% × 6 months ÷ 12 months

=  $3,000

And, the discount charges would be

= $63,000 × 12 % ×  2 months ÷ 12 months

= $1,260

The 2 months is come from

= 12 months - 6 months - 4 months

= 2 months

So, the cash proceed would be

= $60,000 + $3,000 - $1,260

= $61,740