When a Note Payable Is Issued for Property, Goods, or Services

question 88

Multiple Choice

When a note payable is issued for property, goods, or services, the present value of the note should preferably be measured by

• A) the present value of the property, goods or services.
• B) the fair value of the property, goods, or services.
• C) the fair value of the debt instrument.
• D) the present value of the debt instrument.

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Definitions:

Nominal Rate

The stated interest rate of a loan or investment, not taking into account the effect of compounding.

Semiannually

Referring to an occurrence or event happening twice a year.

Maturity Date

The particular date when the last payment of a loan, bond, or another financial instrument must be made.

Strip Bond

A Strip Bond is an investment vehicle created by separating a bond's periodic interest payments from its principal repayment obligation and selling each part as individual securities.