20. On December 31, 2016, London Bank granted a P5,000,000 loan to borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31, 2018, the bank determined that the borrower would A kick only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods.

20. On December 31, 2016, London Bank granted a P5,000,000 loan to borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31, 2018, the bank determined that the borrower would A kick only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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20. On December 31, 2016, London Bank granted a P5,000,000 loan to borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31, 2018, the bank determined that the borrower would A kick only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. 1. What is the amount of cash paid to the borrower on December 31, 2016? a. 4,400,000 b. 4,500,000 c. 5,000,000 d. 4,650,000
On December 31, 2014, JKL Bank granted P6,000,000 loan to a borrower with a 10% stated rate payable SEMI-ANNUALLY and maturing in 4 years. The loan was discounted at an interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31, 2016, the bank determined that the borrower would pay back only P1,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P6,000,000 loan. (Round off PV factor to 4 decimal places) 1. Cash paid to the borrower on December 31, 2014 2. Carrying amount of the loan at December 31, 2016 3. Interest income for the year 2016 4. Impairment loss to be recognized on December 31, 2016 5. Carrying amount of the loan at December 31, 2017
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the impairment loss on loan receivable to be recognized in 2022?
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the amount of cash paid to the borrower on December 31, 2020
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the carrying amount of the loan receivable on December 31, 2022.
. On April 30, 2022, Lenny Inc. borrowed $10 million cash from Colonial Bank and issued a 5-month, noninterest-bearing note, priced to yield an effective interest rate of 10%. The stated discount rate on this loan is: A. More than the effective interest rate. B. Less than the effective interest rate. C. Equal to the effective interest rate. D. Unrelated to the effective interest rate
On January 1, 2017, Cheyenne Company issued a $1,224,300, 5-year, zero-interest-bearing note to Ayayai Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Cheyenne fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2018, Ayayai Bank decided that the loan was impaired. Cheyenne will probably pay back only $816,200 of the principal at maturity.
On December 31, 2020, London Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower woresend because of lower revenue On December 31, 2022, the bank determined that the borrower would oay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. 1. What is the amount of cash paid to the borrower on December 31, 2020? a. 4,400,000 b. 4,500,000 c. 5,000,000 d. 4,650,000 2. What is the carrying amount of the loan receivable on December 31, 2022? a. 4,650,000 b. 4,790,000 c. 4,772,960 d. 4,720,000 3. What is the impairment loss on loan…
On December 31, 2019, Leni Company, a financing institution lent P10,000,000 to Digong Corp. due 3 years after. The loan is supported by an 10% note receivable. Based on the company’s initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 9% is at 1,000,000. The probability of default (PD) is at 5%. Leni Company was able to collect interest as it became due at the end of 2020. There was no evidence of significant increase in credit risk by the end 2020 and that the receivable is determined to have “low credit risk”. There were no changes in its initial estimate of the 12 months expected credit loss either. By the end of 2021, Leni Company was able to collect interest as it became due. Based on available forward-looking information (determinable without undue cost or effort), however, there is an evidence that there was a significant increase in credit risk by the end of 2021. Leni Company therefore had to change its basis of calculation of the…
Cozy Bank loaned a borrower P7,500,000 on January 1, 2018. Problem 7-6 (IAA) The terms of the loan were payment in full on 2023, plus annual interest payment at 12%. January 1, The interest payment was made as scheduled on 2019. However, due to financial setbacks, the borrower w unable to make the 2020 interest payment. January 1, The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2020. The bank accrued the interest on December 31, 2019, but dia not continue to accrue interest for 2020 due to th impairment of the loan. Projected cash flows Amount projected on December 31, 2020 Date of cash flow December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 500,000 1,000,000 2,000,000 4,000,000 Present value of 1 at 12% For one period For two periods For three periods For four periods 0.89 0.80 0.71 0.64 Required: 1. Compute the present value of the loan receivable on December 31, 2020. 2. Compute the impairment loss on the loan…
B. MATATAG Bank loaned P5,000,000 to a borrower on January 1, 2019. The term of the loan require principal payments of P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on January 1, 2020. The borrower made the required payments during 2020 and 2021. However, during 2021 the borrower began to experience financial difficulties, requiring the bank to reassess the collectability of the loan. On December 31, 2021, the bank has determined that the remaining principal payment will be collected as originally scheduled but the collection of the interest is unlikely. The bank did not accrue the interest on December 31, 2021. Present value of 1 at 8% 0.926 For one period For two periods For three periods 0.857 0.794 1. What is the impairment loss for 2021? а. 423,000 b. 217,000 c. 222,000 d. 0 2. What is the interest income for 2022? a. 126,160 b. 142,640 c. 240,000 d. 0 3. What is the carrying amount of the loan receivable on December 31,…
Global bank loaned P9,000,000 to a borrower on January 1, 2018. The terms of the loan were payment in full on January 1,2023, plus annual interest payment at 12%. The interest payment was made a scheduled on January 1, 2019. However, due to financial setbacks, the borrower was unable to make the 2020 interest payment. The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2020. The bank has accrued the interest on December 31, 2019, but did not continue to accrue interest for 2020 due tot he impairment of the loan. The projected cash flows are: Date of cash flow Amount projected on December 31, 2020 1,500,000 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 The present value of 1 at 12% is .89 for one period, .80 for two periods, .71 for three periods, and .64 for four periods. What is the interest income for 2021? 2,000,000 2,500,000 3,000,000 A.795,600 B.900,000 C.180,000 D.0