Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.)

Question

Quizplus · Accepted Answer

To find the amount due on the dishonored note, we need to calculate the interest for the 60-day period. The formula for simple interest is:

Interest = Principal x Rate x Time

In this case, the principal is $7,800, the rate is 10% (or 0.10), and the time is 60/360 (since we use a 360-day year). Therefore:

Interest = $7,800 x 0.10 x 60/360 = $130

So the amount due on the dishonored note would be the original principal plus the interest, or $7,800 + $130 = $7,930. Therefore, the best choice is (C).

Valley Spa Purchased $7,800 in Plumbing Components from Tubman Co