Marble Company discounts a customer's 10%,$7,000,90-day note dated August 1,on September 20.The discount period is 40 days,and the bank discount rate is 15%.The maturity value of the note is $7,175.The bank discount is:
A)$95.62.
B)$31.88.
C)$119.58.
D)$43.25.

Question

Quizplus · Accepted Answer

First, calculate the maturity date of the note: August 1 + 90 days = October 30. 
Then, calculate the end of the discount period: August 1 + 40 days = September 10. 
Since the company discounted the note on September 20, the note was not discounted within the discount period. 
To calculate the bank discount: 
Maturity value x Discount rate x Time 
$7,000 x 0.15 x (50/360) = $119.58 
Therefore, the bank discount is $119.58.

Marble Company Discounts a Customer's 10%,$7,000,90-Day Note Dated August 1,on