The Face Value on a Loan Is $8,000, the Interest

question 24

Multiple Choice

The face value on a loan is $8,000, the interest is 10%, and the time is 5 months based on a 360-day year. The bank discounted the note at 12% two months before the maturity of the loan. What is the bank discount?

• A) $686.67
• B) $333.33
• C) $267.14
• D) $166.67

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Definitions:

LIFO Layers

In accounting, layers created under the Last-In, First-Out inventory valuation method, each representing a specific cost associated with inventory purchased at different times.

Inventory Holding Gains

Inventory holding gains are the increases in value of inventory the company holds due to price increases, not yet realized through sales.

Liquidation

The process of bringing a business to an end and distributing its assets to claimants, usually when the company is unable to meet its financial obligations.

LIFO

Last In, First Out, an inventory accounting method where the last items added to inventory are the first ones to be used or sold, affecting cost of goods sold and inventory valuation.