Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. After accruing all interest expense due as of April 1, Year 2, Baltimore Company made the cash payment for the full amount due (i.e., principal and interest)to Bank of the Chesapeake. How does the cash payment affect Baltimore's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question

Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. After accruing all interest expense due as of April 1, Year 2, Baltimore Company made the cash payment for the full amount due (i.e., principal and interest) to Bank of the Chesapeake. How does the cash payment affect Baltimore's financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The Answer of Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. After accruing all interest expense due as of April 1, Year 2, Baltimore Company made the cash payment for the full amount due (i.e., principal and interest)to Bank of the Chesapeake. How does the cash payment affect Baltimore's financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Baltimore Company Issued a $9,000 Face Value Discount Note to Bank