Note basics Flashcards
1
Q
Diff between interest and non interest bearing
A
Interest bearing has a percentage of interest written on the note
Non interest bearing is included in the discount amount.
2
Q
Discount formula
A
Amt at maturity x discount rate x fraction of year
3
Q
What happens with a dishonored note?
A
The not has no value and the account switches over to accounts receivable (plus a default fee)
4
Q
Which is a greater expense? a 10% discount or a 10% interest?
A
the discount because the interest rate multiplies against the principle where the discount rate multiplies against the maturity. Discount is always higher.
5
Q
On the balance sheet, financial assets are shown at what value?
A
present
