In: Accounting
in determining whether an installment contract provides for adequate interest, a mimimim rate of 9% or less is used when the seller financing is no more than what amount
300
500,000
1.0 million
2.8 million
Solution: 500,000
Explanation: When seller financing in year 2017 is not more than $5,717,400, then the required minimum interest will be the lower of the applicable AFR or 9% compounded semi-annually; for seller financing that is higher than this amount, the minimum rate of interest is the AFR. For sales prices which is more than $500,000, the lower of 9% or advance filing rules (AFR) will be applicable