Question

In: Accounting

in determining whether an installment contract provides for adequate interest, a mimimim rate of 9% or...

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

Solutions

Expert Solution

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


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