New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1644 - Debt Service › Subpart 1644-2 - Debt Service Prior To Issuance Of Housing Bonds › Section 1644-2.2 - Computation of interest on temporary (short-term) indebtedness

Current through Register Vol. 46, No. 28, July 10, 2024
Interest on local agency temporary indebtedness,
						  whether to the State, as evidenced by certificates of indebtedness, or to
						  private investors, as evidenced by temporary loan notes, is computed on the
						  basis of a 360-day year, with each month considered as having 30 days. The date
						  of issue, or effective date of issue, of the evidence of indebtedness is
						  included, but not the date of maturity. The computation of interest on
						  temporary indebtedness is illustrated in the following example, where it is
						  assumed that a temporary loan note for $100,000 is dated January 28, 1947,
						  matures on April 15, 1947 and bears an interest rate of 80 per cent per annum.
						  The computation would be equally valid where the local agency had issued its
						  certificate of indebtedness for an advance by the State representing the
						  proceeds of an issue of short-term notes by the State.
(a)
Step 1.
Using the above conventions, determine the life of the
						  note, in days, as follows:
Month
No. of days
January (1/28, 1/29 and 1/30)
3
February
30
March
30
April
14
Total
77
Note that, in arriving at the number of days, January
						  31 has not been counted and that each full calendar month between the issue and
						  maturity dates is counted as 30 days, regardless of the actual number of days
						  in the respective months. This results from the application of the convention
						  for the 30-day month. Special cases may arise where the date of issue or
						  maturity is the 31st day of a month. These are handled by counting the 31st day
						  as one day, if the issue date is the 31st day of the month, and by counting the
						  month as 30 days, if the maturity date is the 31st day of the month.
(b)
Step 2.
Determine the daily rate of interest, in dollars, by
						  multiplying the principal amount of the note by the interest rate and dividing
						  the product by 360 days:
$100,000 *
									 80%/360
=
$2.222222
The quotient is carried out to six decimal places, and
						  reduced to five decimal places. If the sixth decimal is four or less, it is
						  dropped and the fifth decimal retained unchanged, but if the sixth decimal is
						  five or more, the fifth decimal is increased by one when the sixth decimal is
						  dropped.
(c)
Step
						3.
Determine the amount of interest to be accrued at the
						  end of each quarter in accordance with the illustration which follows:
Month
No. of days
Daily interest
									 rate
Interest to be
									 accrued
January (1/28, 1/29, 1/30)
3
2.22222
$ 6.67
February
30
2.22222
66.67
March
30
2.22222
66.67
Totals
63
$140.01
When a full quarter is involved, the quarterly accrual
						  is obtained by multiplying the monthly interest ($66.67) by the number of
						  months (three) or $200. The total interest accrued can be checked by
						  multiplying the aggregate life of the note, in days, by the daily interest rate
						  and adjusting the interest for the final month for any possible difference,
						  which should, at most, be not more than a few cents.