Which of the Following Is True About Non-Interest Bearing Notes

question 24

Multiple Choice

Which of the following is true about non-interest bearing notes?

• A)The most common method of determining the fair value of non-interest bearing notes is the discounted cash flow analysis.
• B)Non-interest bearing short-term payables may never be measured at the original invoice amount.
• C)A rule of thumb is to use the face value for non-interest bearing notes payable with a duration of greater than 90 days.
• D)A rule of thumb is to use the market value for non-interest bearing notes payable with a duration of 90 days or less.

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Definitions:

Closing Costs

Closing costs are fees and expenses paid during the closure of a real estate transaction, including attorney fees, commissions, and taxes.

Straight-line Depreciation

A technique of distributing the expense of a physical asset uniformly over its operational lifespan.

Accelerated Depreciation

A method of depreciation in which an asset loses book value at a faster rate than the traditional straight-line method over its useful life.

Useful Life

The expected time period over which an asset is useful to the owner.