When Consideration Is Deferred and There Is a Below-Market Rate

question 3

Multiple Choice

When consideration is deferred and there is a below-market rate of interest charged the fair value of the consideration should be determined:

• A) as the nominal amount of the cash receivable
• B) by discounting all future receipts using an imputed rate of interest
• C) by discounting all future receipts using the interest rate in the contract
• D) as the recommended retail price of the item sold.

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Definitions:

Common Law

A legal system based on custom, court rulings, and past incidents rather than written laws.

Case Law

Law established by previous court decisions and based on precedent rather than statutes or regulations; integral to common law legal systems.

Employment-at-will

A legal doctrine that means an employer has the right to terminate an employee at any time for any reason, except an illegal one, and the employee is likewise free to quit, strike, or otherwise cease work.

Terminate

To bring something to an end; in employment, it refers to the act of ending the employment relationship between an employer and employee.