Business transactions often involve the exchange of property, goods, or services for notes on similar instruments that may stipulate no interest rate or an interest rate that varies from prevailing rates. Required: 1. When a note is exchanged for property, goods, or services, what value should be placed on the note: i. If it bears interest at a reasonable rate and is issued in a bargained transaction entered into at arm's length

Question

Triston Davidson

Business

7 August, 10:05

Business transactions often involve the exchange of property, goods, or services for notes on similar instruments that may stipulate no interest rate or an interest rate that varies from prevailing rates. Required: 1. When a note is exchanged for property, goods, or services, what value should be placed on the note: i. If it bears interest at a reasonable rate and is issued in a bargained transaction entered into at arm's length

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Isabell Ponce · Answer 1

When a note is exchanged for property, goods, or services, the value placed on the note: i. If it bears interest at a reasonable rate and is issued in a bargained transaction entered into at arm's length should be the outstanding principal balance of such note.

Explanation:

Business transactions often involve the exchange of property, goods, or services for notes on similar instruments that may stipulate no interest rate or an interest rate that varies from prevailing rates

In certain cases, a supplier will require a note payable instead of terms such as net 30 days.

The value placed on notes the fair market value of a note will be the outstanding principal balance of such note, provided that such note bears interest at a rate no less than the applicable federal rate at the time of valuation.

For most companies the amounts in Notes Payable and Interest Payable are reported on the balance sheet as the amount due within one year of the balance sheet date.