Question

Chang Co. issued a $54,300, 120-day, discounted note to Guarantee Bank. The discount rate is 10%. Assuming a 360-day year, the cash proceeds to Chang Co. are ______ . Round your answer to the nearest whole dollar.

Answer 1

$52,490

Step-by-step explanation:

The computation of the cash proceed is shown below:

= Issued price - discount expense

where,

issued price is $54,300

And, the discount expense would be

= Issued amount × rate of interest × number of days ÷ (total number of days in a year)

= $54,300 × 10% × (120 days ÷ 360 days)

= $1,810

Now put these values to the above formula

So, the value would be equal to

= $54,300 - $1,810

= $52,490