If the proceeds of a note discounted at a bank are greater than the face value of the note, the difference is recognized as
A)interest receivable.
B)interest expense.
C)notes receivable discounted.
D)interest income.

Question

Quizplus · Accepted Answer

The difference between proceeds and face value in a note discounted by a bank represents interest income for the bank. This is because the bank is providing the borrower with cash resources before the note's maturity date, and it charges a discount on the face value to compensate for the time value of money. This discount represents the interest charged by the bank, which is recognized as interest income.

If the Proceeds of a Note Discounted at a Bank