A seller waiting for payment is charging for the wait whether or not the contract names a rate, so that charge is interest rather than asset cost.
This overstates the asset, overstates depreciation for its whole life, and reports no interest on a financing arrangement that plainly exists.
The absence of a stated rate is exactly when imputation is required. A stated rate that is unreasonably low is treated the same way.
The difference is interest earned over the term of the note, not a day-one expense.
Answer: a
Choice a. Discount the payments at the market rate; the asset takes the present value and the remainder is interest.