A borrower has two alternatives for a loan: (1) issue a $75,000, 90-day, 7% note or (2) issue a $75,000, 90-day note that the creditor discounts at 7%.
a. Calculate the amount of the interest expense for each option.
b. Determine the proceeds received by the borrower in each situation.
c. Which alternative is more favorable to the borrower? Explain.
A business issued a 60-day, 8% note for $60,000 to a creditor on account. Record the entries for
(a) the issuance of the note and (b) the payment of the note at maturity, including interest.