Question

Chang Co. issued a $54,300, 120-day, discounted note to Guarantee Bank. The discount rate is 9%. Assuming a 360-day year, the cash proceeds to Chang Co. are ______ . Round your answer to the nearest whole dollar. a.$54,707 b.$59,187 c.$52,671 d.$54,300

Answer 1

Answer:

c.$52,671

Explanation:

The computation of the cash proceeds to chang co is shown below;

But before that, we have to find the interest which is

= Issued amount × discount rate × number  of days ÷ total number of days in a year

= $54,300 × 9% × 120 days ÷ 360 days

= $1,629

Now the cash proceeds are

= Issued amount - interest amount

= $54,300 - $1,629

= $52,671

hence, the correct option is c.