On January 2, 2019, Grey Company received an P800,000, 8%, 2 year note from Black Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Black Corporation was in financial crisis, and as a result of this development, Grey Company expects that the interest for 2020 will not be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9% (PV of an annuity for 3 years at 9% is 2.577)
On January 2, 2019, Grey Company received an P800,000, 8%, 2 year note from Black Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Black Corporation was in financial crisis, and as a result of this development, Grey Company expects that the interest for 2020 will not be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9% (PV of an annuity for 3 years at 9% is 2.577)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 28E: On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First...
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What amount of impairment loss should Grey Company recognize on December 31, 2020 related to its notes receivable?
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