A borrower has two alternatives for a loan
A borrower has two alternatives for a loan: (1) issue a $75,000, 90-day, 7% note or (2) issue a
$75,000, 90-day note that the creditor discounts at  7%.
a. Â Â Â Â Calculate the amount of the interest expense for each option.
b. Â Â Â Determine the proceeds received by the borrower in each situation.
c. Â Â Â Â Which alternative is more favorable to the borrower? Explain.
A business issued a 60-day, 8% note for $60,000 to a creditor on account. Record the entries for
 (a) the issuance of the note and (b) the payment of the note at maturity, including interest.
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Posted 20 May 2017 09:05 AM
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A----------- bo-----------rro-----------wer----------- ha-----------s t-----------wo -----------alt-----------ern-----------ati-----------ves----------- fo-----------r a----------- lo-----------an:----------- (1-----------) i-----------ssu-----------e a----------- $7-----------5,0-----------00,----------- 90------------da-----------y, -----------7% -----------not-----------e o-----------r (-----------2) -----------iss-----------ue -----------a -----------$75-----------,00-----------0, -----------90------------day----------- no-----------te -----------tha-----------t t-----------he -----------cre-----------dit-----------or -----------dis-----------cou-----------nts----------- at-----------  -----------7%.----------- a-----------. ----------- Â-----------  ----------- Â-----------  ----------- C-----------alc-----------ula-----------te -----------the----------- am-----------oun-----------t o-----------f t-----------he -----------int-----------ere-----------st -----------exp-----------ens-----------e f-----------or -----------eac-----------h o-----------pti-----------on.----------- b-----------. ----------- Â-----------  ----------- Â-----------  -----------Det-----------erm-----------ine----------- th-----------e p-----------roc-----------eed-----------s r-----------ece-----------ive-----------d b-----------y t-----------he -----------bor-----------row-----------er -----------in -----------eac-----------h s-----------itu-----------ati-----------on.----------- c-----------. ----------- Â-----------  ----------- Â-----------  ----------- W-----------hic-----------h a-----------lte-----------rna-----------tiv-----------e i-----------s m-----------ore----------- fa-----------vor-----------abl-----------e t-----------o t-----------he -----------bor-----------row-----------er?----------- Ex-----------pla-----------in.----------- A----------- bu-----------sin-----------ess----------- is-----------sue-----------d a----------- 60------------da-----------y, -----------8%
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