Hi Steven. Thanks for the video. The borrow from Foster Company on 7% note for 120 days. Does it mean the interest rate will be applied 7% for 120 days? What happens if the back payment happens after 120 days? Because the repayment happens in 5 months after the borrowing in this example. Does not it affect the total sum of interest?
In this example, 120 days after January 1 is May 1 so it's still being paid on-time. The month of May has not happened yet, as of May 1, so the only months that have passed are January, February, March and April. If a company cannot or does not pay back their loan by the maturity date, they will need to work with the lender that they borrowed from to figure out a way to repay the loan in the future. So, if they couldn't pay back the loan on May 1, they could run into some problems depending on how flexible their lender is willing to be with a grace period.
This is helping me with my exam so much! Thank you!
Listen I'm sajid I need some note regarding topic may you share ?
Hello Steven! Explain, please. Why do you divide by 360? not 365. Thanks
We divide by 360 to just make the math easier for us in class. Most banks would use 365 when they are calculating interest.
Thank you! I really needed help to understand "time" on the interest formula.
Glad it was helpful!
Hi Steven. Thanks for the video. The borrow from Foster Company on 7% note for 120 days. Does it mean the interest rate will be applied 7% for 120 days? What happens if the back payment happens after 120 days? Because the repayment happens in 5 months after the borrowing in this example. Does not it affect the total sum of interest?
In this example, 120 days after January 1 is May 1 so it's still being paid on-time. The month of May has not happened yet, as of May 1, so the only months that have passed are January, February, March and April.
If a company cannot or does not pay back their loan by the maturity date, they will need to work with the lender that they borrowed from to figure out a way to repay the loan in the future. So, if they couldn't pay back the loan on May 1, they could run into some problems depending on how flexible their lender is willing to be with a grace period.
Does notes payable current liability or non currect liability. Also non trade not payable comes under operating activities or financing activities?
(This is a June 5)I have a question if I I’m the patient and I promise to pay a bill of 1k on June 15
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Appreciate ya
Thanks man :)
Happy to help!