A borrower has two alternatives for a loan: (1) Issue a $75,000, 90-day, 7% note or (2)

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A borrower has two alternatives for a loan:
(1) Issue a $75,000, 90-day, 7% note or
(2) Issue a $75,000, 90-day note that the creditor discounts at 7%.
a. Calculate the amount of the interest expense for each option.
b. Determine the proceeds received by the borrower in each situation.
c. Which alternative is more favorable to the borrower? Explain.

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Financial Accounting An Integrated Statements Approach

ISBN: 978-0324312119

2nd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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