If a Note Receivable Was Issued at an Amount That

question 43

Multiple Choice

If a note receivable was issued at an amount that is less than its face value, then

• A) the note was issued at a premium.
• B) the note was issued at a discount.
• C) the note's stated rate was the same as the prevailing market rate of interest.
• D) it must be a zero-interest-bearing note.

---

Definitions:

Retained Earnings

The portion of a company's profit that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay off debt.

Paid-In Capital

The total amount of money that shareholders have invested in the company by purchasing shares directly from the company.

Common Stock

Equity ownership in a corporation, where holders often have voting rights but are last in line in claims to assets and income.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.