TRUE OR FALSE: An implicit or imputed rate of interest must be used when long-term notes are issued at a stated rate of interest that is materially different from the market rate of interest.

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

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Q: Under the effective interest method of interest bearing note in lump-sum payment, the interest to be…

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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: The following statements pertain to the pr Which is not in accordance with generally Long-term notes…

A: There are various regulations prescribed in the generally accepted practice which assists in…

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: Floating rate notes are overly sensitive to interest rate risks. True or False

A: Floating rate notes are notes in which the interest rate changes with change of interest rates in…

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

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Q: How is periodic interest determined for outstanding liabilities? For outstanding receivables? How…

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Q: If the market rate of interest is greater than the contractual rate of interest, bonds will sell a.…

A: Bonds: Bonds are a debt instrument on which interest is paid. They can be issued at a discount/par…

Q: A debit to Premium on Bonds Payable would least likely be possible on which of the situations?…

A: The bonds are issued at premium when market rate is lower than the coupon rate of bonds.

Q: A debit to Discount on Bonds Payable would most likely be possible on which of the situations?…

A: The bonds are issued at discount when market rate is higher than the coupon rate of interest.

Q: The amortization of premium on notes receivable is a. deduction from accrued interest receivable b.…

A: The bonds are issued at premium when market rate is lower than the coupon rate of bonds.

Q: 1. The discounting of note receivable is accounted for as a secured borrowing. 2. The discounting of…

A: Note receivables: Note receivables can be defined as the written promise made by the borrower to…

Q: Notes Receivable with an Effective and Nominal Rate should report interest expense as?   Effective…

A: Solution: Notes Receivable with an Effective and Nominal Rate should report interest expense as…

Q: In hedging, interest rate swap (IRS) can be used to hedge against rising rates, falling rates,…

A: to understand the topic better, the interest rate swap is defined as the contract between any two or…

Q: effective interest technique

A: Bonds are the financial securities used to raise debt fund from public. They carry fixed interest…

Q: Define Short-Term Interest-Bearing Notes.

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

Q: Interest on a note receivable typically is due along with the face value at the note’s maturity…

A: Notes receivable is a legal contract with established payment terms included with periodical…

Q: Which of the following is true for bonds issued at a discount? a. The stated interest rate is…

A: The issue of bonds at discount means that the cash received from the issue of bonds is less than the…

Q: Interest income recognized for a noninterest bearing note is: Group of answer choices Based on…

A: Note means an instrument issued by company acknowledging the debt due from company to bond holder.…

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: Statement 1: A notes payable wherein its fair value exceeded its face amount can tell us that it was…

A: Notes payable: It implies a written promissory note that is borne by the bearer and it contains a…

Q: ond interest rates may differ from market interest rates because:

A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…

Q: In practice, interest rates do not stay the same over time unless by contractual obligation. Select…

A: Interest rate is the percentage amount of interest which is due per period and is calculated as a…

Q: Which of the following statements is true relating to amortization of discount on notes receivable?…

A: Solution: "Amortization of discount increases the note's stated interest and decreases the note's…

Q: Repricing risk refers to:   Question 11 options:   Risk of a change to the maturity of a credit…

A: Repricing refers to any change in the interest rate because of change in maturity date or may be due…

Q: Short-term notes payable: O Can replace an account payable O Can be issued in return for money…

A: Short-term notes payable are considered a negotiable instrument. In this one-party agree to pay a…

Q: What effect does collateral have on the interest rate paid on a bond? Subordination also has an…

A: Many variables influence the interest rate on a bond, including collateral, subordination, and so…

Q: Under the effective interest method of interest bearing note in lump-sum payment, the interest to be…

A: The bonds are issued at premium or discount depending on the market interest rate of bonds. If…

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: What is the expected result of a zero-interest-bearing note that is sold today for less than face…

A: Solution: Zero interest bearing note are note that contains no interest and same is issued at a…

Q: When bonds are redeemed before maturity, how is the gain or loss onredemption determined? Why does…

A: A bond is a repaired instrument that represents a loan from an investor to a borrower (typically…

Q: What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes…

A: Imputed Interest: According to the Internal Revenue Service (IRS), an imputed interest is an…

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: At the maturity of a note​ payable, a borrower will pay​ ________.   A. the interest amount only…

A: Note​ payable: Note​ payable is also referred as promissory note. In this, borrower obtains a…

Q: What is the effective interest rate of a bond or other debt instrument measured at amortized cost?…

A: The effective rate is increased times the bond's value at the beginning of the accounting amount to…

Q: Which of the following statements correctly describes aspects of simple interest as discussed in…

A: Simple interest is one of the methods used for charging interest on a loan by multiplying the…

Q: Which of the following is not a characteristic of a short-term note payable? Payment is due in less…

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Q: The effective interest technique is used to charge a discount on a bond that is due to be paid to…

A: The most effective approach to generating interest is... To amortize a bond over some time, the…

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: Which of the following does not impact the calculation ofthe cash interest payments to be made to…

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Q: In compound interest calculations, the interest rate applied can be known from the initial and final…

A: Compound Interest: In most cases, when you put money into a savings account or a similar account,…

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 selling price for bonds is computed by calculating the present value of future cash receipts by…

A: A bond is a liability for the company on which the company would require to pay the interest until…

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.