Problem 7-14 (IAA)On December 31, 2021, Oregon Bank recorded an investmentof P5,000,000 in a loan granted to a client.The loan has a 10% effective interest rate payable annuallyevery December 31. The principal is due in full at maturityon December 31, 2024.Unfortunately, the borrower is experiencing significantfinancial difficulty and will have difficult time in making fullpayment.The bank projected that the entire principal will be paid atmaturity and 4% interest or P200,000 will be paid annuallyon December 31 of the next three years. There is no accruedinterest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, andthe present value of an ordinary annuity of 1 at 10% for threeperiods is 2.49.1. What amount should be reported as impairment loss for2021?a. 752,000b. 600,000c. 250,000d. 748,0002. What amount should be reported as interest income for2022?a. 200,000b. 424,800c. 224,800d. 500,0003. What is the carrying amount of the loan receivable onDecember 31, 2022?a. 5,000,000b. 3,750,000c. 4,472,800d. 4,672,800

SOLUTION WORKING NOTE- TOTAL PRESENT VALUE OF CASH FLOWS- PRESENT VALUE OF PRINCIPLE…

Answered: Problem 7-14 (IAA) On December 31,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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On December 31, 2021, Cholo Bank recorded an investment of P 5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024. Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment. The bank projected the entire principal will be paid at maturity and 200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021. The present value of 1 @ 10% for three periods 0.75 The present value of an ordinary annuity of 1 at 10% 2.49 What is the impairment loss for 2021?
On December 31, 2021, Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024.Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment.The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49. What is the loan impairment loss for 2021?
On December 31, 2021, Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024.Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment. The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49. What is the carrying amount of the loan receivable on December 31, 2022? a. 5,000,000 O b. 3,750,000 O c. 4,472,800 O d. 4,672,800
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