Harrison Company has a loan receivable with a carrying value of $15,000 at December 31, 2019. On January 3, 2020, the borrower, Thomas Clark Imports, declares bankruptcy, and Harrison estimates that it will collect only 60% of the loan balance. 21) Which of the following entries would Harrison make to record the impairment under IFRS? a) Loan Receivable 9,000 Impairment Loss 9,000 b) Loan Recovery Expense 6,000 Loan Receivable 6,000 c) Impairment Loss 9,000 Loan Receivable 9,000 d) Bad Debt Expense 6,000 Provision for Doubtful Accounts 6,000 22) Assume that on January 5, 2021, Harrison learns that Thomas Clark Imports has emerged from bankruptcy. As a result, Harrison now estimates that all but $1,500 will be repaid on the loan. Under IFRS, which of the following entries would be made on January 5, 2021? a) Provision for Doubtful Accounts 4,500 Bad Debt Expense 4,500 b) Loan Receivable 1,500 Recovery of Impairment Loss 1,500 c) Bad Debt Expense 1,500 Impairment Loss 1,500 d) No journal entry is allowed under IFRS.
Use the following information to answer Question 21 and 22.
Harrison Company has a loan receivable with a carrying value of $15,000 at December 31, 2019. On January 3, 2020, the borrower, Thomas Clark Imports, declares bankruptcy, and Harrison estimates that it will collect only 60% of the loan balance.
21) Which of the following entries would Harrison make to record the impairment under IFRS?
a) Loan Receivable 9,000
Impairment Loss 9,000
b) Loan Recovery Expense 6,000
Loan Receivable 6,000
c) Impairment Loss 9,000
Loan Receivable 9,000
d)
Provision for Doubtful Accounts 6,000
22) Assume that on January 5, 2021, Harrison learns that Thomas Clark Imports has emerged from bankruptcy. As a result, Harrison now estimates that all but $1,500 will be repaid on the loan. Under IFRS, which of the following entries would be made on January 5, 2021?
a) Provision for Doubtful Accounts 4,500
Bad Debt Expense 4,500
b) Loan Receivable 1,500
Recovery of Impairment Loss 1,500
c) Bad Debt Expense 1,500
Impairment Loss 1,500
d) No
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