Note basics

Question 1

Diff between interest and non interest bearing

Answer 1

Interest bearing has a percentage of interest written on the note
Non interest bearing is included in the discount amount.

Question 2

Discount formula

Answer 2

Amt at maturity x discount rate x fraction of year

Question 3

What happens with a dishonored note?

Answer 3

The not has no value and the account switches over to accounts receivable (plus a default fee)

Question 4

Which is a greater expense? a 10% discount or a 10% interest?

Answer 4

the discount because the interest rate multiplies against the principle where the discount rate multiplies against the maturity. Discount is always higher.

Question 5

On the balance sheet, financial assets are shown at what value?

Answer 5

present