Madison Graphics had the following notes receivable transactions: May 1 Sold merchandise on account to L. Carney,

Question:

Madison Graphics had the following notes receivable transactions:

May 1 Sold merchandise on account to L. Carney, $5,600.

20 L. Carney gave a $5,600, 90-day, 12% note to extend time for payment.

30 L. Carney’s note is discounted at Commercial Bank at a discount rate of 15%.

June 20 Received a $2,400, 60-day, 10% note from P. Arnst in payment for sale of merchandise.

July 5 P. Arnst’s note is discounted at Commercial Bank at a discount rate of 12%.

Aug. 19 P. Arnst’s note is dishonored. The bank bills Madison Graphics for the maturity value of the note plus a $30 bank fee.

31 P. Arnst’s dishonored note is collected; Arnst pays Madison the maturity value of the note, the $30 bank fee, and interest at 10% on the maturity value plus the bank fee.

Sept. 1 Sold merchandise on account to B. Faust, $6,400.

12 B. Faust paid $400 and gave a $6,000, 30-day, 12% note to extend time for payment.

Oct. 12 B. Faust paid $400, plus interest, and gave a new $5,600, 60-day, 14% note to extend time for payment.

26 B. Faust’s note is discounted at Commercial Bank at a discount rate of 14%.

Dec. 11 B. Faust’s note is dishonored. The bank bills Madison Graphics for the maturity value of the note plus a $30 bank fee.

Dec. 27 B. Faust’s dishonored note is collected. Faust pays Madison Graphics the maturity value of the note, the $30 bank fee, and interest at 14% on the maturity value plus the bank fee.

REQUIRED

Record the transactions in a general journal.

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...