An uninsured patient cannot pay for a major life threatening surgery. ABC Health offers the patient long term financing where the entire amount can be paid in full for 3 years. The cash price of the surgery is $100,000.00 and a contract is issued with an implicit rate of 5.5% Beginning Year 1 2 3 Accounts Instructions A. Record the journal entry as of the surgery date Accounts $100,000.00 Accounts $111,303.00 Accounts Debit Accounts Debit $105,500 B. At the end of the first year ABC recognizes interest associated with the loan Debit Interest Debit $5,500 C. At the end of the second year ABC recognizes interest associated with the loan $5,803 Debit $6,122 Credit D. At the end of the third year ABC recognizes interest associated with the loan Credit Credit Credit E. The patient pays the full amount of the loan receivable at the end of the third year Ending $105,500.00 = $ 111,303.00 $ 117,425.00 Credit

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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An uninsured patient cannot pay for a major life threatening surgery. ABC Health offers the patient long term financing where the entire amount can be paid in full for 3 years.
The cash price of the surgery is $100,000.00 and a contract is issued with an implicit rate of 5.5%
Beginning
Ending
Year
1
2
3
Accounts
Instructions
A. Record the journal entry as of the surgery date
Accounts
$100,000.00
Accounts
$111,303.00
Accounts
Debit
Accounts
B. At the end of the first year ABC recognizes interest associated with the loan
Debit
$105,500
Debit
Interest
C. At the end of the second year ABC recognizes interest associated with the loan
Debit
$5,500
$5,803
$6,122
Debit
Credit
D. At the end of the third year ABC recognizes interest associated with the loan
Credit
Credit
Credit
E. The patient pays the full amount of the loan receivable at the end of the third year
Credit
$105,500.00
$ 111,303.00
$ 117,425.00
Transcribed Image Text:An uninsured patient cannot pay for a major life threatening surgery. ABC Health offers the patient long term financing where the entire amount can be paid in full for 3 years. The cash price of the surgery is $100,000.00 and a contract is issued with an implicit rate of 5.5% Beginning Ending Year 1 2 3 Accounts Instructions A. Record the journal entry as of the surgery date Accounts $100,000.00 Accounts $111,303.00 Accounts Debit Accounts B. At the end of the first year ABC recognizes interest associated with the loan Debit $105,500 Debit Interest C. At the end of the second year ABC recognizes interest associated with the loan Debit $5,500 $5,803 $6,122 Debit Credit D. At the end of the third year ABC recognizes interest associated with the loan Credit Credit Credit E. The patient pays the full amount of the loan receivable at the end of the third year Credit $105,500.00 $ 111,303.00 $ 117,425.00
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