Bill's Bikes Discounts a Customer's 90-Day, 8%, $3,000 Note at a Bank

question 8

Multiple Choice

Bill's Bikes discounts a customer's 90-day, 8%, $3,000 note at a bank at 12%. The discount period is 45 days. It records the proceeds as: (Use a 360-day year. Do not round any intermediate calculations. Round your final answers to the nearest dollar.)

• A) debit Cash $3,014; credit Notes Receivable $3,000; credit Interest Income $14.
• B) debit Cash $3,150; credit Notes Receivable $3,060; credit Interest Income $90.
• C) debit Cash $3,046; credit Notes Receivable $3,000; credit Interest Income $46.
• D) debit Cash $3,014; credit Notes Receivable $3,000; credit Interest Expense $14.

---

Definitions:

Traditional Format

An accounting income statement format that categorizes costs by their function, such as cost of goods sold, operating expenses, and other expenses.

Fixed Cost

Costs that remain constant in total regardless of changes in the level of production or sales activity.

Per Unit

A term used to denote the cost or price of a single item or measure of a service or product.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid for a specific business.