If a company issues a non-interest-bearing note payable, then
A)no interest expense will be recognized over the life of the note.
B)no principal payments will be made over the life of the note.
C)no interest payments will be made over the life of the note.
D)the covenants should be rewritten to conform to GAAP.

Question

Quizplus · Accepted Answer

Non-interest-bearing notes payable typically involve interest implicitly through a discount on the note's face value, meaning no explicit interest payments are made, but interest expense is recognized over the life of the note.

If a Company Issues a Non-Interest-Bearing Note Payable, Then