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The maturity value of a note is the total amount that is due at the end of the note's term. It includes both the principal amount and the interest that has accrued over the life of the note. To calculate it, you use the formula:

• Principal refers to the initial amount of the note, in this case, \(20,000.
• Interest Rate is the rate at which interest accumulates, here expressed as 6% annually.
• Time represents the life of the note in days, which is 90 days for this exercise.

The formula to compute this is:\[\text{Maturity Value} = \text{Principal} \times \left(1 + \frac{\text{Interest Rate} \times \text{Time}}{360}\right)\]Substitute the given values to find:\[\text{Maturity Value} = 20,000 \times \left(1 + \frac{0.06 \times 90}{360}\right) = 20,000 \times 1.015 = 20,300\]So, the maturity value for this note is \)20,300.

Note discounting is a process by which a holder of a note can receive cash prior to the note's maturity by selling it to a financial institution, usually a bank. The bank applies a discount rate, which is essentially the bank's fee for providing early access to the funds.

• Determine the Discount Period, which is the remaining time from the discounting date to the note's maturity date, here 60 days after discounting on April 14.
• The Discount Rate offered by the bank is typically higher than the note's interest rate (8% compared to 6% here).

To calculate the discount amount, use:\[\text{Discount} = \text{Maturity Value} \times \left(\frac{\text{Discount Rate} \times \text{Discount Period}}{360}\right)\]In this exercise:\[\text{Discount} = 20,300 \times \frac{0.08 \times 60}{360} = 20,300 \times 0.013333 = 270.67\]Upon rounding, the discount is \(271. The proceeds received from the bank are the maturity value minus the discount. Hence:\[\text{Proceeds} = 20,300 - 271 = 20,029\]So, by discounting the note, Theisen Co. receives \)20,029 immediately.

Recording financial transactions correctly is essential in financial accounting. When discounting a note, you need to ensure the correct journal entries reflect the transaction's nature.

• Debit the Cash account with the proceeds amount. This is the actual cash received, $20,029 in our case.
• Debit the Discount on Notes Receivable account with the discount amount, which represents the cost of getting an immediate payment, recorded here as $271.
• Credit the Notes Receivable account with the note's face value, as this offset against the original note receivable balance which was included in the maturity face value upon creation. This amounts to $20,300 for Theisen Co.

This gives the following journal entry: ``` Debit Cash 20,029 Debit Discount on Notes Rec. 271 Credit Notes Receivable 20,300 ``` Journal entries like this help to transparently record transactions and assist in financial audits and when preparing financial statements.