Recognition and Measurement of Long-Term Notes Receivable

question 53

Essay

Recognition and measurement of long-term notes receivable
Kohl Company lent $49,587 to Hemingway Inc., accepting Hemingway's 2-year, $60,000, zero-interest-bearing note. The implied interest rate is 10%. Prepare Kohl's journal entries for the initial transaction, recognition of interest each year, and the collection of $60,000 at maturity. Kohl Company follows IFRS.

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Definitions:

HMO

A Health Maintenance Organization, a type of health insurance plan that restricts coverage to care from doctors who work for or contract with the HMO.

PPO

Preferred Provider Organization, a healthcare plan that offers members reduced rates if they choose healthcare providers from within a prescribed network.

Contracted Services

Professional services provided by an outside party under the terms of a contractual agreement.

IPA

An acronym that can refer to Independent Practice Associations, which are legal entities organized and owned by a network of independent physicians for the purpose of reducing overhead or contracting with health insurers.