If a company has a long-term account receivable outstanding and the receivable does not require interest, what is the effect on revenue and the receivable account?
$\begin{array}{ll}&\text { Revenue }&\text { Receivable }\\hline
A.&\text { Overstated } & \text { Overstated } \
B.&\text { Overstated } & \text { Understated } \
C.&\text { Understated } & \text { Overstated } \
D.&\text { Understated } & \text { Understated }
\end{array}$

Question

If a company has a long-term account receivable outstanding and the receivable does not require interest, what is the effect on revenue and the receivable account? 
$\begin{array}{ll}&\text { Revenue }&\text { Receivable }\\hline
A.&\text { Overstated } & \text { Overstated } \
B.&\text { Overstated } & \text { Understated } \
C.&\text { Understated } & \text { Overstated } \
D.&\text { Understated } & \text { Understated }
\end{array}$

Quizplus · Accepted Answer

Revenue is not affected by the interest terms of a receivable, so it remains correctly stated. However, if the receivable does not require interest, it should be recorded at its present value, which is lower than its nominal value. Not doing so overstates the receivable.

If a Company Has a Long-Term Account Receivable Outstanding and the Receivable