Shelley Corporation discounted a $7,000, 90-day note dated June 18, at the Sunshine Bank on July 18 at a discount rate of 12%. (Assume the $7,000 is the maturity value.)The amount of bank discount is:

Question

Quizplus · Accepted Answer

First, find the bank discount by using the following formula: 
Bank discount = maturity value x discount rate x time 
Bank discount = $7,000 x 0.12 x (90/360) 
Bank discount = $140 
Therefore, the answer is (C) $140.

Shelley Corporation Discounted a $7,000, 90-Day Note Dated June 18