Long-term Receivables - Answer the following with explanation:

1. In calculating the carrying amount of loan receivable, the lender adds to the principal

I. Direct origination cost

II. Indirect origination cost

III. Origination fee charged to borrower

a. I only.

b. I and II only.

c. I and III only.

d. I, II, and III.

2. If there is evidence that an impairment loss on loan receivable has been incurred, the loss is equal to the excess of the

a. Principal amount of the loan over its carrying amount.

b. Carrying amount of the loan over its principal amount of the loan.

c. Carrying amount of the loan receivable over the present value of the cash flows related to the loan.

d. Present value of the cash flows related to the loan over the carrying amount of the loan receivables.

3. Subsequent to initial recognition, loans and receivables are measured at

a. Cost.

b. Amortized cost using effective interest method.

c. Amortized cost using straight-line method.

d. Fair value.

4. An entity received a seven-year zero interest-bearing note on February 1, 2021 in exchange for property sold. There was no established exchange price for the property and the note has no ready market. The prevailing rate of interest for a note of this type was 7% on February 1, 2021, 6% on December 31, 2021, 8% on February 1, 2022, and 9% on December 31, 2022. What interest rate should be used to calculate the interest revenue from the transaction for the years ended December 31, 2021 and 2022, respectively?

a. 6% and 9%

b. 0% and 0%

c. 7% and 9%

d. 7% and 7%

5. In an entity's April 30, 2021 statement of financial position, a note receivable was reported as a noncurrent asset and the accrued interest for eight months was reported as a current asset. Which of the following terms would fit the entity's note receivable?

a. Both principal and interest are payable on August 31, 2021 and August 31, 2022.

b. Principal and interest are due December 31, 2021.

c. Both principal and interest are payable on December 31, 2021 and December 31, 2022.

d. Principal is due August 31, 2022, and interest is due August 31, 2021 and August 31, 2022.

6. On July 1 of the current year, an entity obtained a two-year 8% note receivable for services rendered. At that time, the market rate of interest was 10%. The face amount of the note and the entire amount of interest are due on the date of maturity. Interest receivable on December 31 of the current year is?

a. 5% of the face amount of the note.

b. 5% of the present value of the note.

c. 4% of the present value of the note.

d. 4% of the face amount of the note.

7. The carrying value of an impaired note immediately after the recognition of the impairment loss is the?

a. Nominal sum of remaining cash flows to be received.

b. The book value before the impairment is recognized less accrued interest.

c. Present value of remaining cash flows to be received, discounted at the original interest rate implicit in the note.

d. Present value of remaining cash flows to be received, discounted at the current market rate of interest