The Face Value of a Simple Discount Note Is $4,000

question 68

Short Answer

The face value of a simple discount note is $4,000. The bank discount is calculated at 12% for 60 days. Use ordinary interest. Calculate:
A. Amount of interest charged for note
B. Amount borrower would receive
C. Amount payee would receive at maturity
D. Effective rate (round to the nearest hundredth of a percent)

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Definitions:

First-In

Often used in the context of inventory management, "First-In" refers to goods that were acquired or produced first being sold, used, or disposed of first.

Average Cost

A method of inventory valuation that determines the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.

Ending Inventory

The price of stock available for transaction at the termination of an accounting interval.

FOB Destination

A shipping term indicating that the seller bears the shipping costs and remains responsible for the goods until they are received and signed for by the purchaser.