A 120-Day Promissory Note for $50,000 Bears Interest at R

question 91

Multiple Choice

A 120-day promissory note for $50,000 bears interest at r = 10%.It is sold 90-days before the maturity date to a bank that discounts the note at r = 15%.What does the bank pay for the note?

• A)$49,742.71
• B)$49,801.85
• C)$49,782.29
• D)$49,841.48

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Definitions:

Physical Count

The actual counting of inventory items, typically performed at the end of an accounting period to verify records.

Revenue Recognition Principle

A rule in accounting that outlines the exact circumstances in which income is considered as earned and documented.

Adjusted Trial Balance

A statement that lists all accounts and their balances after adjusting entries are made, ensuring the total debits equal total credits.

Debit

An accounting entry that increases asset or expense accounts, and decreases liability, equity, or revenue accounts.