Is the face value of a note receivable exchanged

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Reference no: EM132184634

Question - Is the face value of a note receivable exchanged for goods and services always equal to the sales value of the transaction? Explain.

A. The face value equals the sales value if the stated rate of interest is less than the current market rate of interest or, if that is not the case, then if the sales value is determinable. However, if the stated rate is higher than the market rate and the fair value of the goods or services provided is not determinable, then the present value will be computed using the market rate as the discount rate. The sales value of the transaction should equal the present value of the note, which may not equal the face value of the note. The face value of the note will not always equal the sales value of the transaction.

B. The face value equals the sales value if the stated rate of interest is reasonable when compared to the current market rate of interest or, if that is not the case, then if the sales value is determinable. However, if the stated rate is not reasonable compared to the market rate and the fair value of the goods or services provided is not determinable, then the present value will be computed using the market rate as the discount rate. The sales value of the transaction should equal the present value of the note, which may not equal the face value of the note. The face value of the note will not always equal the sales value of the transaction.

C. The face value is always equal to the sale value of the transaction because it always equals the fair value of the goods or services provided.

D. The face value is always equal to the sale value of the transaction because the stated rate of interest is always used when calculating the present value of the note.

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