The entry to record interest revenue on an impaired note receivable is computed each period by multiplying the
A)maturity value of the note by the contract interest rate
B)carrying value of the note by the contract interest rate
C)carrying value of the note by the market interest rate
D)maturity value of the note by the market interest rate

Question

Quizplus · Accepted Answer

The carrying value of the impaired note receivable is used because it reflects the current value of the asset. Multiplying it by the contract interest rate allows for recognition of interest revenue based on the original terms of the agreement.

The Entry to Record Interest Revenue on an Impaired Note