A debt instrument with no ready market is exchanged for property whose fair value is currently indeterminable. When such a transaction takes place
A) the present value of the debt instrument must be approximated using an imputed interest rate.
B) it should not be recorded on the books of either party until the fair value of the property becomes evident.
C) the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction.
D) the directors of both entities involved in the transaction should negotiate a value to be assigned to the property.

Question

Quizplus · Accepted Answer

In such a transaction, the present value of the debt instrument must be approximated using an imputed interest rate as there is no ready market for the debt instrument. This estimated value would serve as a basis for the exchange transaction.

A Debt Instrument with No Ready Market Is Exchanged for Property