On September 30, 2014, David's Co

question 22

Essay

On September 30, 2014, David's Co.'s treasurer signed a note promising to pay $520,000 on December 31, 2014. Proceeds of the note were $501,800.
(a.) Calculate the discount rate used by the lender.
(b.) Calculate the effective interest rate on the loan.
(c.) Write the journal entry to show the effect of recording interest expense for the month of October.

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Definitions:

Posterior Lesions

Damage to the back part of the brain, which can affect visual processing and other functions.

Synesthesia

Ability to perceive a stimulus of one sense as the sensation of a different sense, as when sound produces a sensation of color; literally, feeling together.

Convergent Thinking

Form of thinking that searches for a single answer to a question (such as 2+2=?); contrasts with divergent thinking.

Divergent Thinking

Form of thinking that searches for multiple solutions to a problem (how many ways can a pen be used?); contrasts with convergent thinking.