Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2013. The note, along with interest at 6%, is due on June 30, 2014. On September 30, 2013, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?

Question

Quizplus · Accepted Answer

To calculate the amount of cash Ireland received from the bank, we need to first calculate the present value of the note receivable as of September 30, 2013.

Step 1: Calculate the remaining term of the note
June 30, 2014 - September 30, 2013 = 9 months

Step 2: Calculate the interest on the note from June 30, 2013 to September 30, 2013
$40,000 x 6% x 3/12 = $600

Step 3: Calculate the present value of the note receivable as of September 30, 2013
PV = FV / (1 + r)^n
PV = $40,600 / (1 + 10%/12)^9
PV = $39,220.12

Therefore, Ireland received $39,220.12 from Cloverdale Bank after discounting the note. The correct answer is C.

Ireland Corporation Obtained a $40,000 Note Receivable from a Customer