On January 1, 2014, the Pruett Company signed a six-month, non-interest-bearing note payable for $170,000 and received $162,800 from Your Neighborhood Bank. On January 31, 2014, what amount should Pruett record for interest expense, and what is the net carrying value of the note?
A) $1,200; $161,600
B) $ 0; $170,000
C) $7,200; $170,000
D) $1,200; $164,000

Question

Quizplus · Accepted Answer

The discount on the note is $7,200 ($170,000 - $162,800). The interest expense for one month is $1,200 ($7,200 / 6 months). The net carrying value of the note on January 31, 2014, is $164,000 ($162,800 + $1,200).

On January 1, 2014, the Pruett Company Signed a Six-Month