Notes payable Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs. Note exchanged for assets or services Sometimes a note payable or note receivable is exchanged with the assets (cash or noncash) or services. But the stated rate of interest in such notes may not indicate the market rate. The value of the assets or services thus exchanged for the note establishes the market rate. To Discuss: The accountant’ valuation of the note and his intention to value the parts inventory acquired over the four year period of the agreement at actual prices paid, and how would your account for the initial transaction and the subsequent inventory purchases.

Question

East Georgia Community Hospital enters into a contract to provide $15,000 of elective medical care to a patient. After a review of the patient's ability and intent to pay, the hospital does not expect to collect the full contract price of $15,000. However, the hospital occasionally performs "discounted" procedures to members of the community to enhance its standing in the local area. While the hospital invoiced the customer for the full amount of the services, it only expects to collect $10,000. What amount of revenue should the hospital recognize?

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Chapter 14, Problem 14.6BYP

To determine

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Note exchanged for assets or services

Sometimes a note payable or note receivable is exchanged with the assets (cash or noncash) or services. But the stated rate of interest in such notes may not indicate the market rate. The value of the assets or services thus exchanged for the note establishes the market rate.

To Discuss: The accountant’ valuation of the note and his intention to value the parts inventory acquired over the four year period of the agreement at actual prices paid, and how would your account for the initial transaction and the subsequent inventory purchases.

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East Georgia Community Hospital enters into a contract to provide $15,000 of elective medical care to a patient. After a review of the patient's ability and intent to pay, the hospital does not expect to collect the full contract price of $15,000. However, the hospital occasionally performs "discounted" procedures to members of the community to enhance its standing in the local area. While the hospital invoiced the customer for the full amount of the services, it only expects to collect $10,000. What amount of revenue should the hospital recognize?

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