Question

On June 1, 2021, Dirty Harry Co. borrowed cash by issuing a 6-month noninterest-bearing note with a maturity value of $420,000 and a discount rate of 10%. Assuming straight-line amortization of the discount, what is the carrying value of the note as of September 30, 2021

Answer 1

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Answer 2

Answer:

$413,000

Explanation:

Calculation to determine the carrying value of the note as of September 30, 2021

Carrying value=[$420,000 - ($420,000 .010*6/12)]+ [($420,000 .010*6/12)*4/6]

Carrying value=[$420,000-$21,000]+ ($21,000*4/6)

Carrying value=[$420,000-$21,000]+ $14,000

Carrying value=$399,000+ 14,000

Carrying value=$413,000

Therefore the carrying value of the note as of September 30, 2021 is $413,000