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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Does a discounted note payable provide credit without interest? Discuss.

To determine

Short-term notes payable: Short-termnotes payable is a written promise made by the business to pay a certain amount on a future date, with certain percentage of interest within a year. It is generally issue by the company to meet its short-term financing needs.

To discuss: Whether discounted notes payable provide credit without interest.

Explanation

A discounted notes payable does not provide credit without interest.

A discounted note payable contains no stated interest rate. But, it provides interest through discounting the note proceeds. The discount amount which is the difference between the note proceeds and the face value of note, is generally accounted as interest.

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