A note receivable is considered impaired when
A)the debtor misses an interest or principal payment
B)it is probable that the creditor will be unable to collect all amounts due
C)the market value of the note is less than its book value
D)the market value of interest exceeds the original contract interest rate

Question

Quizplus · Accepted Answer

A note receivable is considered impaired when it is probable that the creditor will be unable to collect all amounts due. This means that there is a higher risk that the debtor will default on their payments or become insolvent. Missing a payment is an indicator of financial difficulty but it does not automatically make the note impaired. The market value of the note and interest rate do not necessarily determine impairment, but they may impact the valuation of the note.

A Note Receivable Is Considered Impaired When