Answered: TRUE OR FALSE: An implicit or imputed…

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What is the impact of changes in interest rates on the accounting for variable-rate promissory…

A: The chance of the borrowed or invested quantum that's charged or earned as payment for the…

Q: Discusses price changes for interest rates on loans explain why this change may be taking place.

A: Interest rate are the percentage of the loan amount which the borrower needs to pay to the lender in…

Q: tatement 1: If the nominal rate of the notes is greater than the effective rate of interest, the…

A: >There is a relationship between nominal interest rate and effective interest rate.>Nominal…

Q: Which of these features is ALWAYS present in a convertible note? Valuation cap Discount rate…

A: A short-term debt instrument that is converted into the company’s equity share after a specific…

Q: Which of the following is the worst measure of the cost of debt? Estimating Interest Rate based on…

A: The cost of debt is the effective return that a company pays for its debt to its debtholders. It is…

Q: None

A: In the context of installment notes, the calculation of interest expense is pivotal for accurately…

Q: Bonds are issued at face value when: Effective rate is higher than stated rate Effective rate…

A: Bonds payable is one of the form of liability being presented in the balance sheet. There can be…

Q: The interest rate on a credit linked note will be higher than on a normal note O True O False

A: Credit linked Note is a financial instrument that transfer credit risk to credit investors, in this…

Q: Commercial loan agreements should contain which of the following: a. representations b. fees and…

A: A commercial loan agreement is an agreement between the borrower and the lender. The lender provides…

Q: What is a key difference between a short-term note payable and a current portion of a noncurrent…

A: Short term note payable is a debt which is required to be paid within a period of less than one…

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: None

A: Step 1: Introduction to Issuance of BondsBonds are issued when the issuer needs more funds or…

Q: Which of the following statements is TRUE? a. When the stated rate of interest exceeds the…

A: The stated rate is not considered the compounding factor of the time value of money. The effective…

Q: Vhich of the following is not a credit ev O loan refinancing O bankruptcy O default O debt downgrade

A: Credit default swaps are derivative contract that are done between the the parties and done to…

Q: Notes receivable should be stated at amortized cost which is equivalent to its present value which…

A: The Amortised cost is the present value of cash inflows from note receivable using an effective…

Q: Statement 1: Companies record and report long-term notes receivable on a discounted basis.…

A: Let's Understand some basics Notes Receivable are the promissory notes given by receivables of the…

Q: A trade finance instrument not supported by bank guarantee is called O a. Irrevocable LC O…

A: Answer: There are various types of financial instruments that can be traded on return of any goods…

Q: The definitions of default events are fairly standard, but what really constitutes a default? a. The…

A: Default refers to the failure to comply with the agreed terms of the agreement that the involved…

Q: explain the difference between notes receivable stated rate and market rate, premiums and…

A: Notes receivable: It records the value of promissory note. Promissory note is the note that…

Q: Debentures are frequently issued at amounts greater or less than face value. Discuss how the market…

A: The market rate of interest is the rate of interest that is currently being offered in the market…

Q: bond issuance costs are incurred

A: First option is wrong because one among the options is correct. Second option is wrong because…

Q: Which is true about using a note with stated interest rate vs. a note without stated interest rate…

Q: Discounts on notes receivable are recognized as interest earned over the term of the related note.…

A: A note receivable is a written promise or agreement in which one party (the debtor) agrees to pay a…

Q: There is a formula that will find the APR, i, of a single payment loan but not for a series of…

A: The term “annual percentage rate (APR)” refers to the annual rate of interest charged to borrowers…

Q: When the maker of a note pays at maturity, the note is said to be dishonored. True false question.…

A: The correct answer is FALSE.Explanation:Keypoints to remember:Note: A note is like a written promise…

Q: A note is honored when it is not fully paid at maturity.

A: Note is a kind of instrument which is used to show any future payment to be received or made. For…

Q: What is the effective interest method of amortization? a. It is an amortization method that…

A: Solution: the effective interest method of amortization is that "It is an amortization method that…

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: ounting for notes with unrealistic interest rates, any difference between the amount of interest…

A: Notes payable refers to the type of long-term liabilities which refers to the sum total f money a…

Q: Notes receivable differ from accounts receivable in that notes receivable represent written debt…

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: 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: When the interest is NOT included in the face value of the note, the maturity value is greater than…

A: Face Value is often termed as the nominal value of the asset.The asset can be in the form of shares,…

Q: Interest is most frequently quoted by financial institutions as an effective annual rate (EAR). O…

A: solution Effective annual rate Effective annual rate of interest is the rate of…

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: 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: Please clarify the difference between the stated interest rate on notes receivable and the market…

A: This question tells about the difference between the stated interest rate on notes receivable and…

Q: What is the difference between an interest rate change and a life of loan interest rate change cap.?…

A: Interest rate change caps are financial instruments used to manage interest rate risk for borrowers,…

Q: A-Receivable Financing 3. Identification. If the proceeds from discounting is less than the…

A: Discount with Recourse In Discount with recourse it is upto the decision from the bank to make the…

Q: Which of the following statement is false about premium on bonds payable? It decreases the…

A: Premium on bonds payable is the amount in excess of face value of the bonds payable. In simple, when…

Q: Can there be instances when the interest expense recognized for each period increases? No, such…

A: solution : Can there be instances when the interest expense recognized for each period increases?…

Q: Analyze the truth of this statement: Unlike bonds each installment note payment includes payment of…

A: Not payable can be short term Not payable or a longterm Not payable

Q: Access the FASB Accounting Standards Codification at the FASB website ( www.fasb.org ). Determine…

A: 1. The accounting disclosure requirements for maturities of long – term debt citation is FASB ASC…

Concept explainers

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.

Question

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.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: definition

VIEW

Step 2: Answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

When a borrower is unable to repay its loan, it is common that the lender would negotiate with the borrower by rescheduling its payment on the loan to the future. How would the rescheduling of sovereign bonds affect the interest rate risk of the bonds?
Amortizing the discount on bonds payablea. increases the recorded amount of interest expense.b. reduces the semiannual cash payment for interest.c. reduces the carrying value of the bond liability.d. is necessary only if the bonds were issued at more than face value
Question: It is argued that interest rate should be allowed to an extend of inflation rate so that lender purchasing power may not go down.answer this argument
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 .
18. IDENTIFICATION. This refers to a sale of a single of multiple receivables to any financing institution at a discount. 19. TRUE OR FALSE. The proceeds from discounting is computed by deducting the discount from the carrying value of the notes receivable.
When 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 value
The borrowing base used to guarantee collateral on an operating line of credit is highly dependent on the valuation rates allowed on short-term assets by the lender. A. True B. False
The two main factors that determine the market interest rate on a loan or bond are: Length of time .and Risk True O False O التالی و السابق
Face value of a note payable plus interest is called Omaturity value. O face value. O proceeds. Oprincipal.
With open market operations, the federal reserve sets the interest rate it lends to banks. Ture or false
Which 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.
26) The cash payment or PMT for a Note Payable (installment loan) includes only interest on the loan. TRUE FALSE