97. When Our Note Has Been Discounted. The Western Grocer Co. has either discounted the note or placed it in the bank for collection, and it is presented for payment by the Merchants Bank. We give them a check in payment, and the entry is:
| Bills Payable | $100.00 | |
| Bank | $100.00 | |
| Check to Merchants Bank to pay our note to Western Grocer Co.,due Oct. 10. | ||
The entry in this case is the same as in the previous illustration, with the exception of the explanation.
98. When We Pay Our Note With Interest. We give our note to Western Grocer Co. for $100.00 payable in 30 days, with interest at 6%. We pay the note by check, and the entry is:
| Bills Payable | $100.00 | |
| Interest and Discount | .50 | |
| Bank | $100.50 | |
| Paid Western Grocer Co. note due Oct. 10, by check No. 10. | ||
99. When We Discount Our Note. We wish to borrow $100.00 from the bank, and give our note for the amount, payable in 30 days. The bank discounts the note, placing the proceeds to our credit. The rate of interest charged is 6%. Our entry is:
| Bank | $99.50 | |
| Interest and Discount | .50 | |
| Bills Payable | $100.00 | |
| Note for $100.00, 30 days discounted at bank. | ||
100. When We Pay for Goods With Our Note. We buy goods from Michigan Milling Co. to the amount of $100.00, and tender our note at 30 days with interest, in payment. This makes it unnecessary for us to open an account with Michigan Milling Co. and the entry is:
| Purchases | $100.00 | |
| Bills Payable | $100.00 | |
| Invoice #16 from Michigan Milling Co. Gave note for 30 days with interest at 6%. | ||