AMC Issues a Note with No Stated Interest Rate in Exchange

AMC issues a note with no stated interest rate in exchange for a machine. In accounting for the transaction:

A) The machine should be depreciated over the note's term to maturity.
B) If fair values of the note and machine are unavailable, the note should be recorded at its present value, discounted at the market rate of interest.
C) Both the note and machine are recorded at the face amount of the note or the fair value of the machine, whichever is more clearly determinable.
D) The note is recorded at its face amount unless the fair value of the machine is readily available.

Correct Answer:

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