1. Which of the following statements is incorrect? a Notes payable are initially recognized at fair value minus transaction costs. b. Discount on notes payable is treated as a contra-liability account rather than an asset account. C A short-term, non-trade note payable may nevertheless be discounted if it clearly contains a financing component. d. All interest-bearing notes need not be discounted. 2 The concept that best supports the discounting of notes to their present value is a. time value of money. b. matching. c. accrual basis. d. legal form over substance 3. Which of the following rates is used to compute for the interest expense on a note payable? a. stated rate b. nominal rate c effective interest rate d. coupon rate
1. Which of the following statements is incorrect? a Notes payable are initially recognized at fair value minus transaction costs. b. Discount on notes payable is treated as a contra-liability account rather than an asset account. C A short-term, non-trade note payable may nevertheless be discounted if it clearly contains a financing component. d. All interest-bearing notes need not be discounted. 2 The concept that best supports the discounting of notes to their present value is a. time value of money. b. matching. c. accrual basis. d. legal form over substance 3. Which of the following rates is used to compute for the interest expense on a note payable? a. stated rate b. nominal rate c effective interest rate d. coupon rate
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:PROBLEM 2: MULTIPLE CHOICE-THEORY
4. Railing Co. issued a 4-year, P600,000, noninterest bearing note
that requires payment in lump sum at maturity date. Railing
1. Which of the following statements is incorrect?
a. Notes payable are initially recognized at fair value minus
transaction costs.
b. Discount on notes payable is treated as a contra-liability
account rather than an asset account.
c. A short-term, non-trade note payable may nevertheless be
discounted if it clearly contains a financing component.
d. All interest-bearing notes need not be discounted.
2. The concept that best supports the discounting of notes to
their present value is
a. time value of money.
b. matching.
c. accrual basis.
d. legal form over substance
3. Which of the following rates is used to compute for the
interest expense on a note payable?
a. stated rate
b. nominal rate
C. effective interest rate
d. coupon rate
that
requires payment in lump sum at maturity date. Railing
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