Zeiba, yes, Reg was 2013. Goodness, I better start paying attention to numbers if I want to be a cpa. I went in and fixed it.
On the example of selling a note receivable, the months are correct. It was a 6 month note, so in step one I need to determine the amount of interest for the 6 month time period. If it helps, use the number of days in a 360 period rather than months (i.e. 90/360 like the example in the Beckers book page 19, rather than 3/12).
Then for step 2, there is only a 4 month time period remaining until the note comes due, so I use 4/12 to capture that amount of interest.
After I saw your response, I went back to one of my Becker examples to make sure I was doing it right. I found an example that used a 6 month note as well. Here it is:
Garr Co. received a $60,000, 6-month, 10% interest-bearing note from a customer. After holding the note for two months, Garr was in need of cash and discounted the note at the United Local Bank at 12%. The amount of cash Garr received from the bank was: answer: $60,480.
Computed as follows:
Step 1: Compute total value of note: 60,000 + (60,000 x .10 x 6/12) = 63,000
Step 2: Compute bank Interest: 63,000 x .12 x 4/12 = 2,520
Step 3: Subtract 1 from 2: 63,000 – 2,520 = 60,480.
REG - Nov 4, 2013: 88
FAR - Feb 27, 2014: 86
AUD - April 5, 2014: 91
BEC - May 6, 2014: 83
Florida CPA 24 July 2014
(Done in seven months - thank you Jesus!!)
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