Delivery Plus discounts its own 120-day, 8%, $40,000 notes receivable. It records the proceeds as: (Use a 360-day year. Do not round any intermediate calculations. Round your final answer to the nearest dollar.)
A) debit Cash $38,933; debit Discounts on Notes Payable $1,067; credit Notes Payable $40,000.
B) debit Cash $38,933; credit Discounts on Notes Payable $1,067; credit Notes Payable $40,000.
C) debit Cash $36,800; debit Discount on Notes Payable $3,200; credit Notes Payable $40,000.
D) debit Cash $38,933; credit Notes Payable $38,933.

Question

Quizplus · Accepted Answer

The proceeds are calculated by discounting the note's face value of $40,000 at 8% for 120 days. The discount is $1,067, so the cash received is $38,933. The entry debits Cash for $38,933, debits Discounts on Notes Payable for $1,067, and credits Notes Payable for $40,000.

Delivery Plus Discounts Its Own 120-Day, 8%, $40,000 Notes Receivable