Notes receivable should be stated at amortized cost which is equivalent to its present value which may be its face or discounted value for long term interest bearing and or long term interest bearing with unreasonably low interest rate. TRUE OR FALSE

Notes receivable should be stated at amortized cost which is equivalent to its present value which may be its face or discounted value for long term interest bearing and or long term interest bearing with unreasonably low interest rate. TRUE OR FALSE

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 3MC

See similar textbooks

Related questions

Q: If the proceeds of a discounted note are less than the face amount, the difference is debited to…

Q: Explain the initial measurement of, a. short-term notes receivable b. interest bearing long-term…

A: Hi! Thank you for the question. As per the honor code, We are allowed to answer three sub-parts at a…

Q: he difference between an ordinary annutty and an annulty due is: Multiple Choice an ordinary annuity…

A: Annuity means where regular payment is made at the end of regular period and full amount with…

Q: During a period of inflation, an account balance remains constant. With respect to this account, a…

A: This question is answered as per IAS 29 "Financial Reporting in Hyperinflationary Economies"

Q: The difference between the nominal interest rate and the effectiveinterest rate.

A: The nominal interest rate is the interest rate paid annually without compounding period. The…

Q: Which one of the below most likely respresents the periodic receipts of interest? O the coupon rate.…

A: Periodic payments means fixed amount paid regularly to the investor. Example interest amount on…

Q: Which of the following should not be included in the current liability section of the balance sheet?…

A: The balance sheet is the statement of financial position of the business.

Q: Which of the following is false about the discount on short-term notes payable? * O The Discount on…

A: Notes payable is a written contract which specified a certain payment at a specified data along with…

Q: f a problem is silent to the terms of a note payable, is it considered as a long-term or a…

Q: When the effective-interest method is used to amortize notes premium or discount, the periodic…

A: Introduction: Amortization is the process of reducing the book value of intangible assets over a…

Q: When using the interest tables, the needed interest rate is determined from the intersection between…

A: Interest rate tables show the values of present value/future value factors for $1 investment at a…

Q: A forward rate is a borrowing/lending rate for a loan to be made at some future date. Select…

Q: When a note’s stated rate of interest is unrealistic relative to the market rate, the concept of…

Q: How does the difference between the book value of the debt and the reacquisition price represents…

A: Definition: Early extinguishment debt: When the debt obligations are retired before its scheduled…

Q: Which of the following is not needed to compute the present value of an investment?a. The length of…

A: Present value: Present value refers to the present worth of the money that is received in future…

Q: When is it recommended to compute the effective interest rate per payment period?

A: When there is a compounding of interest, then the EIR per payment period is recommended. As it is a…

Q: Interest paid (earned) on only the original principal borrowed ( lent ) is often referred to as A.…

A: Present value is the discounted value of the principal and interest. Simple interest is the amount…

Q: discounted note will produce an effective rate which is different than the stated rate. Why does…

A: a discounted note is a short term financial products which allows the company two raise the cash…

Q: debt

A: Cost of debt can be defined as the rate of interest which a company incurs on its debts. The cost of…

Q: ounting for notes with unrealistic interest rates, any difference between the amount of interest…

A: Notes payable refers to the type of long-term liabilities which refers to the sum total f money a…

Q: Which one of the theories states that “the rate of interest is set in the market for money…

A: Interest rates are fluctuated based on different parameters of the economy. There are different…

Q: The interest rate on debt, r, is equal to the real risk-free rate plus an inflation premium plus a…

A: A bond refers to the instrument which is issued by the government to borrow money when needed. It is…

Q: Short-term non-interest-bearing notes receivable are usually recorded at their a. present value b.…

A: Short-term non-interest notes form part of the current assets of the corporation which is going to…

Q: Define the term the effective interest rate covering the payment period?

A: Interest rates can be of two types- Simple interest rate- This is the interest rate stated in the…

Q: O The principal amount of a noninterest-bearing note is its future cash flows discounted at its…

A: Non-Interest bearing note is that type of note or bond which does not show interest charge on its…

Q: Please clarify the difference between the stated interest rate on notes receivable and the market…

A: This question tells about the difference between the stated interest rate on notes receivable and…

Q: Explain an example of Short-Term Interest-Bearing Notes.

A: Short-term interest-bearing note: The short-term interest-bearing note is a note on which interest…

Q: Explain the classification issues of short-term debt expected to be refinanced.

A: Short term debt: It refers to the financial obligation for the firm that needs to be paid within one…

Q: Whenever payment and compounding periods differ from each other, it is recommended to compute the…

A: The effective annual interest rate is the real return for a bank account or other interest paid…

Q: True or false When a non-interest-bearing note has been issued at a discount or premium and is fully…

A: Non-interest bearing note are those liabilities of the entity which are to be repaid after certain…

Q: Which of the following is true? Short-term notes payable should be discounted at its present value,…

A: Note principal states the amount that the note signer agrees for paying back when the note matures…

Q: The interest rate observed in the marketplace for a debt instrument? Observed interest rate…

A: Interest rate that is observed in the market place for debt instrument is real rate of interest.…

Q: If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the…

A: Bonds: Bonds are a kind of interest bearing notes payable, usually issued by companies, universities…

Q: The two main factors that determine the market interest rate on a loan or bond are: Length of time…

A: Market interest rate is the interest rate offered on a financial instrument in the financial market,…

Q: 1. According to PFRS 9, The amortized cost of a financial instrument is calculated using. A. The…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: Based on your understanding of the fAactors that affect the cost of money, Identify which of the…

A: Higher inflation rate would lead to higher interest or nominal rate on the borrowed amount. This is…

Q: Which of the following is not a characteristic of receivables? Select the correct response: The…

A: Option b, c and d are the characteristics of receivables. Option a is the characteristic of an…

Q: A synthetic Collateralized Debt Obligation uses credit default swaps to increase the credit risk of…

A: synthetic collateralized Debt obligation invest in non-cash assets to gain exposure on fixed assets…

Q: This rate is included in the face of the note: stated rate market rate effective interest yield…

A: Rate of the note determine the payment amount in form of interest to the holder. Interest payment is…

Q: The default subsequent measurement base for financial liabilities is: Select one: amortised cost…

A: Financial liabilities mean the obligation of the business that it needs to pay outside the business.…

Question

100%

TRUE OR FALSE

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

The difference between the maturity value of a note and the net proceeds is called discounting.
The concept that supports the discounting of notes to their present value is: time value of money matching form over substance amortization
Which of the following is true? Short-term notes payable should be discounted at its present value, more so, if it constitutes a financing transaction and the imputed interest can be measured without undue cost or effort. Transaction costs of issuing financial liabilities are expensed outright. The present value of a serial note's principal is computed by using the PV of 1 as the present value factor. Notes payable are obligations supported by creditor's promissory notes.
Short-term non-interest-bearing notes receivable are usually recorded at their a. present value b. net realizable value c. principal value d. maturity value
Explain the initial measurement of,a. short-term notes receivableb. interest bearing long-term notesc. noninterest bearing note receivabled. interest bearing below market rate long-term notes
The discount rate used in a net present value analysis is the ________. A. rate of interest earned on a savings account B. rate of inflation C. rate of interest charged for debt financing of an investment D. required rate of return or the hurdle rate
When the market interest rate on a short-term note receivable is greater than the stated rate, ________. Group of answer choices the present value of the note is greater than its stated value the stated value of the note is greater than its face value the stated value of the note is less than its face value the present value of the note is less than its face value
Notes Receivable with an Effective and Nominal Rate should report interest expense as? Effective Rate x PV of Principal Effective Rate x Principal Nominal Rate x PV of Principal Nominal Rate x Principal
A long-term note payable with no stated rate of interest should be reported separately from other short-term notes payable recorded at the face value discounted to its present value recorded at maturity value
Explain an example of Short-Term Interest-Bearing Notes.
Which of the following is not true about the discount on short-term notes payable? a. The Discount on Notes Payable account should be reported as an asset on the balance sheet. b. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. c.The Discount on Notes Payable account has a debit balance. d. Discount on Notes Payable is a contra account to Notes Payable.
The interest on a non-interest bearing note is equal to a. The excess of the face value over the present value. b. The excess of the present value over the face value. c. The excess of the present value over the market value of the note. d. Zero.