The Amount the Bank Charges When It Discounts a Note

question 10

Multiple Choice

The amount the bank charges when it discounts a note is calculated as:

• A) bank discount = note principal × bank discount rate × (discount period /360 days).
• B) bank discount = maturity value × bank discount rate × (original note period /360 days).
• C) bank discount = maturity value × bank discount rate + original interest rate × (discount period /360 days).
• D) bank discount = maturity value × bank discount rate × (discount period /360 days).

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Definitions:

Total Manufacturing Costs

The cumulative cost of materials, labor, and overhead expended on the production of goods.

Gross Profit

The difference between sales revenue and the cost of goods sold, representing the profit from buying and selling goods before administrative and other expenses.

Cost of Goods Manufactured

The total cost incurred by a company to produce goods in a given period, including materials, labor, and overhead expenses.

Net Sales

The amount of sales revenue after deducting sales returns, allowances, and discounts.