Question

On January 8, Lawrence Co. issued a $60,000, 120-day discounted note to Raines Bank. The discount rate is 8%. Assuming a 360-day year, what is the amount of proceeds received?

a.$61,600
b.$58,400
c.$60,000 d.$55,200

Answer 1

The proceeds received by Lawrence Co. from the discounted note at an 8% discount rate for 120 days is $58,400. This is calculated by subtracting the discount amount from the principal value.

Step-by-step explanation:

The question involves calculating the proceeds received by Lawrence Co. from a discounted note. Given the discount rate of 8%, a principal of $60,000, and a term of 120 days, we can calculate the proceeds using the formula for discounted notes: Proceeds = Principal - (Principal * Discount Rate * Time / 360). In this case:

• Principal = $60,000
• Discount Rate = 8% (or 0.08 as a decimal)
• Time = 120 days

Inserting these values into the formula:

Proceeds = $60,000 - ($60,000 * 0.08 * 120 / 360)

Proceeds = $60,000 - ($60,000 * 0.08 * 1/3)

Proceeds = $60,000 - $1,600

Proceeds = $58,400

Therefore, the amount of proceeds received by Lawrence Co. would be $58,400, which corresponds to option b.