Which of the following is not true about the discount on short-term notes payable?
A) The Discount on Notes Payable account has a debit balance.
B) The Discount on Notes Payable account should be reported as an asset on the balance sheet.
C) When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate.
D) Discount on Notes Payable is a contra account to Notes Payable.

Question

Quizplus · Accepted Answer

The Discount on Notes Payable account is a contra account to Notes Payable and has a debit balance. It is reported as a reduction from the face value of notes payable on the balance sheet. The effective interest rate is indeed higher than the stated discount rate when there is a discount on a note payable.

Which of the Following Is Not True About the Discount