On May 17, Otay Olive Co.accepted a $6, 500, 8%, 90-day note from a customer.On June 11, the note was discounted at 10%.At maturity date, the note was dishonored and the bank charged a $25 protest fee.The amount that Otay Olive Co.would debit to Notes Receivable Dishonored is

Question

Quizplus · Accepted Answer

The amount that Otay Olive Co. would debit to Notes Receivable Dishonored includes the face value of the note plus interest earned until the note was discounted (not until maturity, since it was discounted early), and the protest fee. The correct calculation is the face value of the note ($6,500) plus the interest earned from May 17 to June 11 (25 days) at 8% annual interest, which is $35.56 (using a 360-day year for simplicity, $6,500 * 8% * 25/360), plus the $25 protest fee. However, since the specific interest calculation for the period until June 11 is not provided in the options and the protest fee is to be added, the closest correct answer by the given options, considering the initial misunderstanding in calculation, would be to consider the face value plus the protest fee directly, which is not explicitly calculated in the options provided. The correct approach involves recognizing the face value and additional fees or interest as part of the dishonored note amount, but given the options and the typical handling of such transactions, the intended answer seems to be the initial face value plus any additional charges directly related to the dishonor, which is not directly calculable from the provided choices without the specific interest calculation for the discount period. Thus, the correct choice should reflect the principle of including the face value and any penalties or fees, but an exact match is not provided in the options. The explanation aimed to clarify the calculation but given the options, A would be selected based on the principle of including the face value and additional charges, despite the mismatch in calculation steps.