单项选择题
Selling a note receivable before maturity is called discounting a note receivable because the payee of the note receives less than its maturity value. This lower price decreases the amount of interest revenue the payee earns on the note. Giving up some of this interest is the price the payee is willing to pay for the convenience of receiving cash early.
What does a payee have to do when he discounts a note receivable with a bank
A. He has to collect the maturity value of the note on the discounting date.
B. He has to endorse the note.
C. He has to sell it to the note purchaser.
D. He has to get cash quickly.
- Assume that the maturity date of the Dorman note is January 18, 1995 and that General Electric discounts the Dorman note at First City National Bank on December 9, 1994. The discount period--which is the number of days from the date of discounting to the date of maturity (this is the period the bank will hold the note) -- is 40 days; 22 days in December, and 18 days in January. Assume the bank applies a 12 percent annual interest rate in computing the discount value of the note. The bank will want to use a discount rate that is higher than the interest rate on the note in order to increase its earnings. GE may be willing to accept this higher rate in order to get cash quickly. The discounted value, called the proceeds, is the amount that GE receives from the bank. The proceeds are computed as follows:
General Electric’s entry to record discounting the note is:
Dec. 9, 1994cash
$ 15 170
Note receivable
Dorman Builders
$ 15 000
Interest Revenue
$ 170
TO RECORD DISCOUNTING NOTE RECEIVABLEAt maturity the bank collects 15 375 from the maker of the note, earning 205 of interest revenue.
Observe two points in the above computation: (1) The discounting is computed on the maturity value of the note (principal plus interest) rather than on the original principal amount, and (2) the discounting period extends backwards from the maturity date (January 18, 1995) to the date of discounting (December 9, 1994).
相关考题
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单项选择题
How many methods of settlement are mentioned in this passage when the British importer needs dollar to pay his Americans supplier（）
A. Two.
B. Three.
C. One.
D. Several. -
单项选择题
What is a note receivable A. It is a note received by a payer. B. It is paper currency paid for documents as well as notes. C. It is a negotiable instrument which may be used to transfer funds from one person to another. D. It is a negotiable instrument which may be transferable from one person to another.
Assume that the maturity date of the Dorman note is January 18, 1995 and that General Electric discounts the Dorman note at First City National Bank on December 9, 1994. The discount period--which is the number of days from the date of discounting to the date of maturity (this is the period the bank will hold the note) -- is 40 days; 22 days in December, and 18 days in January. Assume the bank applies a 12 percent annual interest rate in computing the discount value of the note. The bank will want to use a discount rate that is higher than the interest rate on the note in order to increase its earnings. GE may be willing to accept this higher rate in order to get cash quickly. The discounted value, called the proceeds, is the amount that GE receives from the bank. The proceeds are computed as follows:
General Electric’s entry to record discounting the note is:
Dec. 9, 1994cash
$ 15 170
Note receivable
Dorman Builders
$ 15 000
Interest Revenue
$ 170
TO RECORD DISCOUNTING NOTE RECEIVABLEAt maturity the bank collects 15 375 from the maker of the note, earning 205 of interest revenue.
Observe two points in the above computation: (1) The discounting is computed on the maturity value of the note (principal plus interest) rather than on the original principal amount, and (2) the discounting period extends backwards from the maturity date (January 18, 1995) to the date of discounting (December 9, 1994). -
单项选择题
Why is the British bank able to offer its customer a banker’s draft drawn in dollar（）
A. Its US correspondent bank prefers to make the payment.
B. It will send dollar in cash by airmail.
C. It has a dollar account with another bank in an American city where the beneficiary lives.
D. Its customer has a dollar account with it.
