2. What is the carrying amount of the loan receivable on December 31, 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 7-13 (IAA)
On December 31, 2020, London Bank granted a P5,000,000
Joan 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 .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.
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2ec1a076-d62a-4642-9610-716bbbf2a829%2Fc858f11c-3c3b-46d2-bd56-2ddd24515603%2Fcvu2fx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 7-13 (IAA)
On December 31, 2020, London Bank granted a P5,000,000
Joan 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 .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.
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
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