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:

Amend Benefits

The act of making changes to the terms or conditions of employee benefits plans.

Amortization

The method of systematically amortizing the initial value of a non-physical asset over its estimated useful lifespan.

Pension Expense

The cost recognized by an employer for maintaining a defined benefit retirement plan for its employees.

Service Cost

The portion of the pension expense that is attributed to the current year's service, representing the present value of benefits earned by employees during the year.