The reported net carrying amount of a non-interest-bearing note payable recorded on a gross basis will increase as time goes by.

Question

Quizplus · Accepted Answer

The net carrying amount of a non-interest-bearing note payable recorded on a gross basis is equal to the face value of the note. As time goes by, the amount of accrued interest on the note increases, but since the note is non-interest bearing, this interest is not recorded. Therefore, the net carrying amount remains the same and does not decrease over time. In fact, the net carrying amount may increase if the note is discounted or sold at a premium to a third party at a later date.

The Reported Net Carrying Amount of a Non-Interest-Bearing Note Payable