AMC Issues a Note with No Stated Interest Rate in Exchange

question 128

Multiple Choice

AMC issues a note with no stated interest rate in exchange for a machine. In accounting for the transaction:

• A) The machine should be depreciated over the note's term to maturity.
• B) If fair values of the note and machine are unavailable, the note should be recorded at its present value, discounted at the market rate of interest.
• C) Both the note and machine are recorded at the face amount of the note or the fair value of the machine, whichever is more clearly determinable.
• D) The note is recorded at its face amount unless the fair value of the machine is readily available.

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