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Question

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Explanation / Answer

Journal Entries

1. Issue of note payable

Creditor A/c Dr...................45000

To Note Payable A/c...................45000

(Being note payable issued)

2.Discounting of note with the bank

Note payable A/c Dr.............45000

Discount charges A/c Dr..............1200

To Bank A/c................................46200

(Being note discounted with bank at the rate of 8% discount charges)

3. Payment to creditor

No entry in the books of the business as the creditor now receives his payment from the bank.

Assumed: Discount rate of 8% given is per annum rate.

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