When a non-interest bearing note is issued as consideration for equipment acquired, the equipment will initially be recorded at the present value of the note payable.

Question

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When a non-interest bearing note is used as consideration for equipment acquired, the equipment will be recorded at the present value of the note payable, which means that the note payable will be discounted by the prevailing interest rate to determine its present value. This present value will be used as the initial recording value for the equipment acquired.

When a Non-Interest Bearing Note Is Issued as Consideration for Equipment