When a note receivable is accepted in exchange for goods sold, and the note bears no stated interest rate (or a below-market rate), the note should be recorded at:

When a note receivable is accepted in

Multiple choice — select the best answer

AThe face value of the note
BThe fair value of the goods surrendered or the note, whichever is higher
CZero, because no interest income is recognized
DThe present value of the future cash flows discounted at an appropriate market rate

✓ Correct answer: D. The present value of the future cash flows discounted at an appropriate market rate Non-interest-bearing (or below-market) notes must be recorded at the present value of future cash flows discounted at an imputed market rate. The difference between face value and present value is recorded as a discount and amortized as interest income over the note's life.

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Topic: Assets & Liabilities

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When a note receivable is accepted in exchange for goods sold, and the note bears no stated interest rate (or a below-market rate), the note should be recorded at:

Related questions — Assets & Liabilities

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