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Manal Elkhoshkhany
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When a note payable is issued for property, goods, or ...

Resolved Question:

When a note payable is issued for property, goods, or services, the present value of the note is measured by

A.        the fair value of the property, goods, or services.
B.        the market value of the note.
C.        using an imputed interest rate to discount all future payments on the note.
D.        any of these.
Submitted: 8 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 8 years ago.

Hello Mrmax

The answer is

C. using an imputed interest rate to discount all future payments on the note.

Regards,

Manal Elkhoshkhany and 3 other Finance Specialists are ready to help you
Expert:  Manal Elkhoshkhany replied 8 years ago.

Here is a quote from your book:

P.S. Thank you for the bonus

In note transactions, other factors involved in the exchange, such as the fair market value of the property, goods, or services, determine the effective or real interest rate. But, if a company cannot determine that fair value, and if the note has no ready market, determining the present value of the note is more difficult. To estimate the present value of a note under such circumstances, the company must approximate an applicable interest rate that may differ from the stated interest rate. This process of interest-rate

approximation is called imputation. The resulting interest rate is called an imputed interest rate.