If an Installment Sale Agreement Involving a $15,000 Note Calls

question 30

True/False

If an installment sale agreement involving a $15,000 note calls for no interest, interest must be imputed both to the buyer as interest expense and to the seller as interest income.

---

Definitions:

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations based on its current income.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the loss in value as it ages, used for accounting and tax purposes.

Cash Coverage Ratio

A financial metric that measures a company's ability to pay off its debt obligations with its operating cash flow. It is an important indicator of financial health.

Debt-Equity Ratio

A marker indicating the relative financing tactics of using debt and equity in company assets.