Reference no: EM132778458

Problem 1: Which is not a correct description of the term related to discounting of note receivable?

A. maturity value is the sum of principal and interest up to maturity date

B. discount is the amount of interest deducted by the bank in advance

C. discount period is the period from date of note to date of discounting

D. net proceeds is the difference between maturity value and discount

E. none of the above

Problem 2: A note receivable bearing a reasonable interest rate is sold to a bank with recourse. If the sale is accounted as conditional sale, at the date of discounting, the note receivable discounted account shall be:

A. decreased by net proceeds from discounting

B. increased by net proceeds from discounting

C. increased by the face value of note

D. decreased by the face value of note

E. none of the above