Note Receivable Issued At Face Value (Stated Interest Rate Equals Market Interest Rate)

Accounting for notes receivable issued at its face value and the note has a stated interest rate, note receivable is a written promise to pay a certain sum of money at a specific future date, all notes have an interest element due to time value of money, (1) Interest bearing notes have a stated rate of interest, (2) non interest bearing notes include interest as part of their face value, this example is based on an interest bearing note (note includes a stated rate of interest), a interest payment based on the stated rate of interest is required on this note, when interest stated on note equals the effective (market) rate of interest, then the note sells at face value, based on the stated rate of interest on the note the present value of the principal plus the present value of the interest payments equals the face value of the note, subtracting the present value of the note from its face value equals zero, therefore no discount is required, notes receivable is recorded along with the interest payments as interest revenue, detailed accounting example by Allen Mursau