In historical cost accounting, the discounting process uses the original interest rate appropriate for the particular borrower at the time it incurred the obligation.That rate will have depended on the amount and terms of the borrowing arrangement as well as the risk that the borrower will default on the obligations.The rate is known as the
A)prime interest rate.
B)explicit interest rate.
C)imputed interest rate.
D)federal funds rate.
E)applicable federal rate.

Question

Quizplus · Accepted Answer

Historical cost accounting uses the imputed interest rate, which is specific to the particular borrower and takes into account the amount and terms of the borrowing arrangement as well as the risk of default. The prime interest rate, explicit interest rate, federal funds rate, and applicable federal rate are all general interest rates that may not reflect the specific circumstances of the borrower.

In Historical Cost Accounting, the Discounting Process Uses the Original