V. Discounting a Note Receivable at the Bank:

Boxster accepted a $200,000, 60-day note receivable from a customer on July 1 for a large consulting project. This note receivable bears interest at 10%. On July 16, Boxster discounted the note receivable at their bank. The banks discount rate is 12%.

Instructions:

Draw a timeline showing acceptance date, discounting date, and maturity date of the note receivable.

Calculate the maturity value of the note receivable.

Calculate the banks discount on the note receivable.

Calculate the cash proceeds Boxster will receive from the bank.

What is Boxsters book value of the note receivable at the date it is discounted?

Calculate Boxsters gain or loss on the discounting transaction.

Prepare the journal entry for: July 1: Accepting the note, July 15: Accruing interest receivable, July 15: Discounting the note