On June 1, 2018, Dirty Harry Co. borrowed cash by issuing a 6-month noninterest-bearing note with a maturity value of $500,000 and a discount rate of 6%. Assuming straight-line amortization of the discount, what is the carrying value of the note as of September 30, 2018? A) $525,000. B) $475,000. C) $495,000. D) $300,000.

Question

Jennifer Medina

Business

23 October, 01:07

On June 1, 2018, Dirty Harry Co. borrowed cash by issuing a 6-month noninterest-bearing note with a maturity value of $500,000 and a discount rate of 6%. Assuming straight-line amortization of the discount, what is the carrying value of the note as of September 30, 2018? A) $525,000. B) $475,000. C) $495,000. D) $300,000.

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Answers (1)

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Xiomara Shaffer · Answer 1

The answer is C. $495,000.

Explanation:

the Face amount = $500,000

Discount = $500,000 * 0.06 * 6/12=15,000

Carrying value as at 6/1/2013 = 485,000

Discount amortization (4/6) = 10,000

Carrying value, 9/30/2013 = $495,000