FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Statement 1: In accounting for notes with unrealistic interest rates, any difference between the amount of interest paid to the creditor and the interest expense recognized for the period is the amount of discount or premium amortized during the period.
Statement 2: If the market rate of interest is greater than the nominal rate of the note, there will be a premium on notes payable to be recognized.
Statement 3 : The amortized cost of the notes payable increases every time there is an amortization of premium.
Statement 2: If the market rate of interest is greater than the nominal rate of the note, there will be a premium on notes payable to be recognized.
Statement 3 : The amortized cost of the notes payable increases every time there is an amortization of premium.
All statements are true.
Only one statement is true.
Two statements are true.
None of the statements are true.
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- True or false 1. The trend of the balance of the discount on note payable during the term of the non-interest bearing note is decreasing. 2. The note payable account will be credited at its present value upon acquisition of a property if the note issued was non-interest bearing. 3. The carrying amount of the note payable is the same all through out the term of an interest bearing note .arrow_forwardWhen 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 valuearrow_forward1. If bonds are sold at a discount and the straight-line method of amortization is used, interest expense in earlier years will: (A) Exceed what is would have been had the effective interest rate method of amortization been used. (B) Be less than what it would have been had the effective interest rate method of amortization been used. (C) Be the same as it would have been had the effective interest rate method of amortization been used. (D) None of the above.arrow_forward
- 22) The effective interest rate method of amortizing bonds allocates the same amount of interest expense to each period. TRUE FALSEarrow_forward#45 A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called: a bond. a compensating balance. a letter of credit. an assignment. factoring.arrow_forwardWhich of the following statements is correct? O There is no interest included in a zero-interest-bearing note. O A long-term note's fair value and present value are always the same. O A note is signed by the payee in favour of the maker. O All notes contain an interest element because of the time value of money.arrow_forward
- 26) The cash payment or PMT for a Note Payable (installment loan) includes only interest on the loan. TRUE FALSEarrow_forwardYu.4arrow_forwardThe maturity value of a note receivable is equal to the sum of the face amount of the note O plus the interest O plus nothing else O none of these answers are correct Ominus the interestarrow_forward
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