Pina Corp. was experiencing cash flow problems and was unable to pay its \$92,400 account payable to Novak Corp. when it fell due on
September 30, 2023. Novak agreed to substitute a one-year note for the open account. The following two options were presented to
Pina by Novak:
Option 1:
A one-year note for \$92,400 due September 30, 2024. Interest at a rate of 9\% would be payable at maturity.
Option 2:
A one-year non-interest-bearing note for \$100,716. The implied rate of interest is 9\%.
Assume that Novak has a December 31 year end.
