Company is to make an annual principal payment of P600,000 for 5 years plus interest at 8%. The first principal and interest payment is due on January 1, 2019. The required payments were made by Stay Company for 2019 and 2020. However, during 2020, Stay Company began to face financial difficulties, requiring Almost Inc. to reevaluate the collectability of the loan. On December 31, 2020, Almost Inc. determines that it will be able to collect the remaining principal, but it is unlikely that the interest will be collected. The following present value factors are taken from the table of present values: PV of 1 at 8% for: 1 period 2 periods 3 periods 0.92593 0.85734 0.79383 What is the present value of the expected future cash flows as of December 31, 2020? 1,800,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2018, Almost Inc. loaned P3,000,000 to Stay Company. Under the loan agreement, Stay
Company is to make an annual principal payment of P600,000 for 5 years plus interest at 8%. The first
principal and interest payment is due on January 1, 2019. The required payments were made by Stay
Company for 2019 and 2020. However, during 2020, Stay Company began to face financial difficulties,
requiring Almost Inc. to reevaluate the collectability of the loan.
On December 31, 2020, Almost Inc. determines that it will be able to collect the remaining principal, but it
is unlikely that the interest will be collected.
The following present value factors are taken from the table of present values:
PV of 1 at 8% for:
1 period
2 periods
3 periods
0.92593
0.85734
0.79383
What is the present value of the expected future cash flows as of December 31,
2020?
O 1,800,000
O 2,146,260
O 1,669,962
O 1,428,894
Transcribed Image Text:On January 1, 2018, Almost Inc. loaned P3,000,000 to Stay Company. Under the loan agreement, Stay Company is to make an annual principal payment of P600,000 for 5 years plus interest at 8%. The first principal and interest payment is due on January 1, 2019. The required payments were made by Stay Company for 2019 and 2020. However, during 2020, Stay Company began to face financial difficulties, requiring Almost Inc. to reevaluate the collectability of the loan. On December 31, 2020, Almost Inc. determines that it will be able to collect the remaining principal, but it is unlikely that the interest will be collected. The following present value factors are taken from the table of present values: PV of 1 at 8% for: 1 period 2 periods 3 periods 0.92593 0.85734 0.79383 What is the present value of the expected future cash flows as of December 31, 2020? O 1,800,000 O 2,146,260 O 1,669,962 O 1,428,894
Refer to the previous problem. What is the amount of loan impairment on
December 31, 2020?
371,106
130,038
730,038
Assuming that Almost Inc.'s assessment of the collectability of the loan has not
changed, what amount of interest income should be recognized for 2021?
P85,597
P144,000
P96,000
P133,597
Transcribed Image Text:Refer to the previous problem. What is the amount of loan impairment on December 31, 2020? 371,106 130,038 730,038 Assuming that Almost Inc.'s assessment of the collectability of the loan has not changed, what amount of interest income should be recognized for 2021? P85,597 P144,000 P96,000 P133,597
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