Notes and Other Receivables AB Company and RT Company both received notes of $10,000 from customers on the same date with the same maturity dates. However, the note receivable recorded by AB Company was interest bearing and the note recorded by RT Company was noninterest bearing.

a. Which of the companies will report the greater carrying value for its note receivable at the date the note is accepted? Explain why.

b. Which company will receive the greater cash flow over the life of the note receivable? Explain.

c. If the stated interest rate on AB’s note is the same as the implicit interest rate used in valuing RT’s note, which company will report the greater amount of interest income in the first year? Explain.