On January 1, 2010, the Long Company signed a six-month, non-interest-bearing note payable for $160, 000 and received $152, 800 from Friendly Bank.On January 31, 2010, what amount should Long record for interest expense, and what is the net carrying value of the note?
A)$1, 200; $151, 600
B)$ 0; $160, 000
C)$7, 200; $160, 000
D)$1, 200; $154, 000

Question

Quizplus · Accepted Answer

The discount on the note is $7,200 ($160,000 - $152,800). Over six months, the monthly interest expense is $1,200 ($7,200 / 6). The carrying value at January 31 is $154,000 ($152,800 + $1,200).

On January 1, 2010, the Long Company Signed a Six-Month