Asked by Tonya Trisko on Jun 19, 2024
Verified
The entry to record interest revenue on an impaired note receivable is computed each period by multiplying the
A) maturity value of the note by the contract interest rate
B) carrying value of the note by the contract interest rate
C) carrying value of the note by the market interest rate
D) maturity value of the note by the market interest rate
Impaired Note Receivable
A note receivable that is doubtful to be collected due to the debtor's financial difficulties, necessitating an impairment loss to be recognized.
Contract Interest Rate
The agreed-upon rate of interest in a loan or lease contract, specifying how much interest will be paid on the principal amount.
Market Interest Rate
The prevailing rate of interest available in the market for securities of comparable risk and maturity, influencing how much interest is paid on bonds and loans.
- Investigate the detection and assessment of impaired loans and notes receivable.
Verified Answer
SM
Shane MundyJun 22, 2024
Final Answer :
B
Explanation :
The carrying value of the impaired note receivable is used because it reflects the current value of the asset. Multiplying it by the contract interest rate allows for recognition of interest revenue based on the original terms of the agreement.
Learning Objectives
- Investigate the detection and assessment of impaired loans and notes receivable.