On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of $60,000 to Reyes Products, Inc. for merchandise inventory. Determine the proceeds of the note assuming the note is discounted at 8%.
A) $55,200
B) $64,800
C) $58,800
D) $61,200

Question

Quizplus · Accepted Answer

To calculate the proceeds of the note, we need to first find the discount, which is calculated by multiplying the face amount of the note by the discount rate and the time period in days (90/360, since it is a 90-day note).

Discount = $60,000 x 0.08 x 90/360 = $1,200

The proceeds of the note is calculated by subtracting the discount from the face amount:

Proceeds = Face Amount - Discount
Proceeds = $60,000 - $1,200
Proceeds = $58,800

Therefore, the correct answer is C) $58,800.