Question

Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are:________
a. $49,750
b. $47,000
c. $49,000
d. $51,000

Answer 1

Answer:

c. $49,000

Explanation:

Calculation to determine what the cash proceeds to Chang Co. are:

Cash proceed=$50,000-($50,000*6%*120/360)

Cash proceed=$50,000-$1,000

Cash proceed=$49,000

Therefore the cash proceeds to Chang Co. are:$49,000