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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is the incremental interest rate of a borrower? When and for what calculations is this rate used if a company exchanges a note for property, goods, or services?

To determine

Describe about the incremental interest of the borrower and state the reason for which this rate is used if a company exchanges a note for property, goods or services.

Explanation

Incremental interest rate:

  • The incremental interest rate of a borrower is the rate the borrower is oblique to make payment in order to get similar financing at the time a note is issued in the credit market.
  • This rate is used by the company, if it exchanges a “non-interest-bearing note” for property, goods, or services and it cannot ascertain either the fair value of the note or the fair value of the property, goods, or services...

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