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On the maturity date of a 60-day, 12% interest-bearing note for $1,000 (360-day year), what total amount of cash does the borrower pay?
A$1,000
B$1,020
C$1,120
D$980
Answer & Solution
Correct answer: B. $1,020
1. At maturity the borrower repays principal plus interest.
2. Interest: \$1{,}000 \times 12\% \times \frac{60}{360} = \$20.
3. Cash paid: \$1{,}000 + \$20 = \$1{,}020.
4. The entry debits Note Payable $1,000 and Interest Expense $20, crediting Cash $1,020.
5. Option D ($980) is the discounted-note proceeds, not a maturity payment.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.3 "Notes Payable", p.216_
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