Non-interest bearing notes are initially recorded at
A)historical cost.
B)maturity value because they bear no interest.
C)present value,based on the prevailing interest for loans of this type.
D)future value,based on the prevailing interest for loans of this type.

Question

Quizplus · Accepted Answer

Non-interest bearing notes are initially recorded at their present value, which is determined by discounting the future cash flows (the maturity value) back to the present using the prevailing market interest rate for similar types of loans. This approach reflects the time value of money, recognizing that a sum of money today is worth more than the same sum in the future due to its potential earning capacity.

Non-Interest Bearing Notes Are Initially Recorded at