Asked by Taylor Fujimoto on May 10, 2024
Verified
Under current GAAP, the rate of interest assigned to non-interest-bearing notes is
A) the borrower's incremental borrowing rate
B) the lender's incremental borrowing rate
C) the interest rate for long-term government securities
D) the prime rate
Non-interest-bearing Notes
Debt instruments that do not accrue interest over time, thus repaid at their face value.
Incremental Borrowing Rate
The interest rate a lessee would have to pay to borrow over a similar term the funds necessary to purchase or lease an asset.
- Understand the principles for recognizing interest revenue and expenses related to non-interest bearing notes.
Verified Answer
DS
Davis stanleyMay 16, 2024
Final Answer :
A
Explanation :
Under current GAAP, the rate of interest assigned to non-interest-bearing notes is the borrower's incremental borrowing rate. This is the rate that the borrower would have to pay to borrow funds from a third party to buy the same asset.
Learning Objectives
- Understand the principles for recognizing interest revenue and expenses related to non-interest bearing notes.