Johnson Co. accepts a note receivable from a customer in exchange for some damaged inventory. The note requires the customer make semiannual installments of $50,000 each for 10 years. The first installment begins six months from the date the customer took delivery of the damaged inventory. Johnsons management estimates that the fair value of the damaged inventory is $679,517.

1- Assume the note receivable for damaged inventory makes up a significant portion of Johnsons assets. If interest rates increase, what happens to the fair value of the receivable? Briefly explain why. 2-The Financial Accounting Standards Board has issued an accounting standard that allows companies to report assets such as notes receivable at fair value. Discuss how fair value versus historical cost potentially involves a trade-off of one desired quality of accounting information against another.