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On July 8, Jones Inc. issue an 80,000, 6%, 120-day note payable to Miller Company. Assume...

On July 8, Jones Inc. issue an 80,000, 6%, 120-day note payable to Miller Company. Assume the fiscal year of Jones ends July 31.
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Answer #1

Face Value - 80,000

Interest for Year = 80,000*6% = 4,800

Number of Days =120 days.

Maturity Date of Bond = 5th November

Interest for Note (considering 360 days in year) = 4,800/360*120 = 1,600 (Total Interest Expense on Note)

Number of Days till 31st July from 8th July = 23 days

Interest Expense till 31st July = 1600/120*23 = 306.67 (rounded off)

Number of Days from 31st July till maturity = 97 days

Interest Expense from 1st Aug till 5th Nov = 1600/120*97 = 1293.33

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