Prefix Supply Company received a 120-day, 6% note for $500,000, dated April 12 from a customer on account. Assume 360-days in a year.

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**a.**  Determine the due date of the note.


August 10April 21July 31June 30May 31August 10

**b.**  Determine the maturity value of the note.
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The due date is the date the note is to be paid.

Assume a 360-day year. The maturity value is the amount that must be paid at the due date of the note.

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**c.**  Journalize the entry to record the receipt of the payment of the note at maturity. If an amount box does not require an entry, leave it blank.

blankAccountDebitCredit

blank

CashInterest ReceivableInterest RevenueNotes ReceivableNotes PayableCash

Accounts ReceivableCashInterest ReceivableNotes ReceivableNotes PayableNotes Receivable

CashInterest ReceivableInterest RevenueInterest PayableNotes PayableInterest Revenue

Let's break down this problem step-by-step:

### **Part a: Determine the due date of the note**
- The note is dated **April 12** and has a term of **120 days**.
- Assume a **360-day year**.

We can calculate the due date by counting 120 days from April 12.

1. **April:** 30 - 12 = 18 days remaining in April.
2. **May:** Full 30 days.
3. **June:** Full 30 days.
4. **July:** Full 30 days.

Now, let's sum these up:
- April: 18 days
- May: 30 days
- June: 30 days
- July: 30 days

This totals 108 days. Since the note is 120 days, we need an additional 12 days in **August**.

So, the due date is **August 10**.

### **Part b: Determine the maturity value of the note**
The **maturity value** is the principal amount plus interest.

The formula to calculate interest is:
\[
\text{Interest} = \text{Principal} \times \text{Rate} \times \frac{\text{Time}}{360}
\]

Where:
- Principal = $500,000
- Rate = 6% = 0.06
- Time = 120 days

Let's calculate the interest:

\[
\text{Interest} = 500,000 \times 0.06 \times \frac{120}{360} = 500,000 \times 0.06 \times 0.3333 = 10,000
\]

The **maturity value** is the sum of the principal and interest:
\[
\text{Maturity Value} = 500,000 + 10,000 = 510,000
\]

So, the maturity value is **$510,000**.

### **Part c: Journalize the entry to record the receipt of the payment at maturity**
At maturity, the following entries will be made:

- **Debit**: Cash for the maturity value (the total amount received).
- **Credit**: Notes Receivable for the principal amount (the amount owed).
- **Credit**: Interest Revenue for the interest earned.

The journal entry would be:

| **Account**           | **Debit**  | **Credit**   |
|-----------------------|------------|--------------|
| Cash                  | $510,000   |              |
| Notes Receivable      |            | $500,000     |
| Interest Revenue      |            | $10,000      |

### Summary:
1. **Due Date:** August 10
2. **Maturity Value:** $510,000
3. **Journal Entry:**

| **Account**           | **Debit**  | **Credit**   |
|-----------------------|------------|--------------|
| Cash                  | $510,000   |              |
| Notes Receivable      |            | $500,000     |
| Interest Revenue      |            | $10,000      |

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Do you need further details or explanations?

### Related Questions:
1. How would the interest calculation change if the note had a 90-day term instead of 120 days?
2. What would be the journal entry if the note was dishonored and not paid at maturity?
3. How is the due date affected if the note includes leap-year calculations instead of a 360-day year?
4. How would the journal entry differ if the interest was paid at the end of each month instead of at maturity?
5. What effect does an increase in the interest rate have on the maturity value?

### Tip:
Always check if the note follows a **banking year** of 360 days or a **calendar year** of 365 days before calculating interest.

Prefix Supply Company received a 120-day, 6% note for $500,000, dated April 12 from a customer on account. Assume 360-days in a year. Determine the due date of the note, the maturity value, and journalize the entry for receipt of payment.

Learn how to calculate the due date and maturity value for a 120-day, 6% note worth $500,000. This example demonstrates simple interest calculation and journalizing the entry for receipt of payment. Suitable for accounting students.

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