A $20,000 short-term note results in the borrowing company receiving proceeds of $18,400.The interest on this note is said to be:
A)implicit.
B)explicit.
C)estimated.
D)none, the note is interest free.

Question

Quizplus · Accepted Answer

Implicit interest is inferred from the difference between the face value of the note and the actual proceeds received, which in this case is $20,000 - $18,400 = $1,600. This type of interest is not stated directly in the terms of the loan but is implied by the transaction.

A $20,000 Short-Term Note Results in the Borrowing Company Receiving