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:

Expected Value

The long-run average value of repetitions of the same experiment or random trial, indicating the central tendency.

Random Variable

A variable that can take on numerical results from a random event or experiment.

Standard Deviation

An indicator of the spread of a dataset relative to its mean, used to quantify the degree to which individual data points differ from the average.

Monthly Production

The total output or production of a manufacturing process or facility in a single month.