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retail customer paid GMAC over the term of the RISC)
minus the fair market value of the RISC at the time of
its purchase.
b. RISC Bearing a Below-Market Interest Rate
Suppose a retail customer's RISC had a face amount of
$10,000, below-market stated interest of $2,000 to be paid by the
customer over the term of the RISC, and a fair market value of
$9,500. GMAC purchased the RISC for $9,500, and it recorded the
following items on its books:
Retail customer receivable 1$12,000
Cash (9,500)
Unearned income 2(2,500)
1 This figure included the $10,000 face value of the
RISC and $2,000 below-market stated interest.
2 This figure equaled the face amount of the RISC plus
the stated interest (i.e., the total amount the retail
customer was to pay GMAC over the term of the RISC)
minus the fair market value of the RISC at the time of
its purchase.
3. Fleet Loans and Fleet Rate Support
Suppose a fleet customer acquired fleet vehicles for
$1,100,000 making a $100,000 downpayment in cash and financing
the $1 million balance with a note from GMAC with a term of 48
months at an interest rate of 8 percent when GMAC's lending rate
was 10 percent. The fair market value of the note at the time of
its purchase, therefore, was $957,600.24 GMAC lent $1 million to
24 The parties stipulated this example and calculated the
fair market value of the note to be $957,600 and the fleet rate
(continued...)
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