A Debt Instrument with No Ready Market Is Exchanged for Property

question 127

Multiple Choice

A debt instrument with no ready market is exchanged for property whose fair value is currently indeterminable. When such a transaction takes place

• A) the present value of the debt instrument must be approximated using an imputed interest rate.
• B) it should not be recorded on the books of either party until the fair value of the property becomes evident.
• C) the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction.
• D) the directors of both entities involved in the transaction should negotiate a value to be assigned to the property.

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Definitions:

Bogus Pipeline Technique

A psychological technique used in social research to elicit honest responses from participants by falsely claiming the existence of a lie-detector-like mechanism.

Hierarchies

Systems or organizations in which members are ranked one above the other according to status or authority.

Free Market System

An economic system based on supply and demand with minimal government intervention, where prices for goods and services are determined freely by the open market.

Cluster

A group of similar things or people positioned or occurring closely together, often used to refer to a statistical analysis method that identifies groups of similar data points.