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On September 30, 2009, David's Co.'s treasurer signed a note promising to pay $520,000 on December 31, 2009. Proceeds of the note were $501,800.
(a.) Calculate the discount rate used by the lender.
(b.) Calculate the effective interest rate on the loan.
(c.) Write the journal entry to show the effect of recording interest expense for the month of October.

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Solution Summary

The solution determines the discount rate, effective interest and journal entry.

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(a.) Calculate the discount rate used by the lender.

520000 - 501800 = ...

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