How much is the impairment loss on the receivables?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![For items 11 to 12
LYR Finance Company reports a loan receivable from Choice Company
in the amount of P7,500,000. The initial loan's repayments include a
10% interest rate plus annual principal payment of P1,500,000 on
January 1 of each year. The loan was made on January 1, 2021.
Choice made the P750,000 interest payments for 2021 but did not
make the P1,500,000 principal payment nor the P500,000 interest
payment in 2022. Choice is having financial difficulty and LYR has
concluded that the loan is impaired. Analysis of Choice's financial
condition on December 31, 2022 indicates that the principal and
interest currently due can be collected but it is probable that no
further interest can be collected. The probable amounts and timing
collection are determined as follows:
December 31, 2023
December 31, 2024
December 31, 2025
Total
P2,140,000
3,400,000
2,950,000
P8,490,000
The present value factors at 10% are as follows:
1 period - 0.909; 2 periods 0.826; 3 periods - 0.751
How much is the impairment loss on the receivables?
-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F24afbc89-6a82-4988-8a09-9fcaf4ed2f90%2F22e2899e-5184-419e-a66d-133ba7b7ccca%2Fh1gv5ih_processed.png&w=3840&q=75)
Transcribed Image Text:For items 11 to 12
LYR Finance Company reports a loan receivable from Choice Company
in the amount of P7,500,000. The initial loan's repayments include a
10% interest rate plus annual principal payment of P1,500,000 on
January 1 of each year. The loan was made on January 1, 2021.
Choice made the P750,000 interest payments for 2021 but did not
make the P1,500,000 principal payment nor the P500,000 interest
payment in 2022. Choice is having financial difficulty and LYR has
concluded that the loan is impaired. Analysis of Choice's financial
condition on December 31, 2022 indicates that the principal and
interest currently due can be collected but it is probable that no
further interest can be collected. The probable amounts and timing
collection are determined as follows:
December 31, 2023
December 31, 2024
December 31, 2025
Total
P2,140,000
3,400,000
2,950,000
P8,490,000
The present value factors at 10% are as follows:
1 period - 0.909; 2 periods 0.826; 3 periods - 0.751
How much is the impairment loss on the receivables?
-
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