Question

On July 1, Lee Co. sold goods in exchange for a $200,000 8-month noninterest-bearing note receivable. At the time of the sale, the note’s market rate of interest was 12%. What amount did Lee receive when the note was discounted at a bank at 10% on September 1?

Answer 1

Answer:

$190,000

Explanation:

Given:

Loan amount = $20000

Month Remain = [ 8 month  - 2 month ( July - august) non interest bearing] = 6 month

Discount rate = 10%

Calculation of value discounted = Loan amount x Discount Rate x month remain

= $200,000 x 10% x 6/12

= Discounted Amount = $10000

After discount rate = loan amount - discounted amount

= $200,000 - $10,000

After Discount Rate= $190,000