Marley Company received a seven-year zero-interest-bearing note on February 22, 2007, in exchange for property it sold to O'Rear Company.There was no established exchange price for this property and the note has no ready market.The prevailing rate of interest for a note of this type was 7% on February 22, 2007, 7.5% on December 31, 2007, 7.7% on February 22, 2008, and 8% on December 31, 2008.What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2007 and 2008, respectively?

Question

Quizplus · Accepted Answer

The interest rate used to calculate interest revenue should be the rate at the time of the transaction, which was 7% on February 22, 2007, and it remains the same for subsequent years unless otherwise specified.

Marley Company Received a Seven-Year Zero-Interest-Bearing Note on February 22