DAMIPERA Corporation, a lending institution, provided a loan to LAPERA Company for Php5,000,000 on January 1, 2020. The loan has a term of 5 years with interest collectible annually at 10%. Case 1 Case 2 Case 3 Equal After 5 installments Payment of principal After 5 years Direct origination cost Origination fee years at end of the year 20,445 80,309 39,522 400,000 117,272 21,279 Effective interest rate 12.00% 9.50% 10.50%

DAMIPERA Corporation, a lending institution, provided a loan to LAPERA Company for Php5,000,000 on January 1, 2020. The loan has a term of 5 years with interest collectible annually at 10%. Case 1 Case 2 Case 3 Equal After 5 installments Payment of principal After 5 years Direct origination cost Origination fee years at end of the year 20,445 80,309 39,522 400,000 117,272 21,279 Effective interest rate 12.00% 9.50% 10.50%

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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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

100%

Write the journal entries in 2020 and 2021 for the three cases. No need to use PV Factors just get the PRESENT VALUE using the face value, origin cost, and origination fee.

DAMIPERA Corporation, a lending institution, provided a loan to LAPERA Company
for Php5,000,000 on January 1, 2020. The loan has a term of 5 years with interest
collectible annually at 10%.
Case
Case 2
Case 3
Equal
After 5 installments
at end of
Payment of principal
After 5 years
years
Direct origination cost
Origination fee
Effective interest rate
the year
20,445
80,309
39,522
117,272
-- A - .
400,000
21,279
12.00%
9.50%
10.50%

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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