A firm that does not account for long-term notes and bonds using the fair value option, uses the _____ to account for the loan while it is outstanding.
A)present and future market interest rates
B)future market interest rates
C)fair market interest rates
D)historical market interest rate
E)current market interest rate

Question

Quizplus · Accepted Answer

When a firm does not use the fair value option for accounting long-term notes and bonds, it typically uses the historical market interest rate (the interest rate at the time the loan was issued) to account for the loan while it is outstanding. This approach involves amortizing the premium or discount over the life of the bond based on the effective interest rate method, which relies on the interest rate at issuance.

A Firm That Does Not Account for Long-Term Notes and Bonds