Question

When an asset is acquired by signing a noninterest-bearing note payable, and the estimated fair value of the asset is not known, the asset should be recorded at the fair value of the note, which is the?

1) estimated resale value of the equipment
2) present value of the note discounted at the market rate
3) future value of payments on the note
4) maturity value of the note payable

Answer 1

When an asset is acquired by signing a noninterest-bearing note payable and the estimated fair value of the asset is not known, it should be recorded at the fair value of the note.

Step-by-step explanation:

When an asset is acquired by signing a noninterest-bearing note payable and the estimated fair value of the asset is not known, the asset should be recorded at the fair value of the note, which is the present value of the note discounted at the market rate.