Question
What is the expected result if Northern Pine Company accepts $16,750 for a zero-interest-bearing, three-year note with a face value of $20,000? A) Northern Pine
What is the expected result if Northern Pine Company accepts $16,750 for a zero-interest-bearing, three-year note with a face value of $20,000?
A) Northern Pine will earn interest but has no way to determine the interest rate since it is not stated.
B) Northern Pine will have no interest revenue from this note because it is zero-interest-bearing.
C)Northern Pine must approximate the fair value of the note by comparing it to similar items.
D)Northern Pine can determine the implicit interest rate by amortizing the difference between the future value and the present value over the life of the note.
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