On December 31, 2020, BROWN Bank has a 5-year loan receivable with a face value of 6,000,000 dated January 1, 2019 due on December 31, 2023. Interest is payable annually every December 31 at 9%. The borrower made the required interest payment on December 31, 2019 but informed the bank that interest accrued for 2020 will be paid together with the principal at maturity. There is a high probability that remaining interest payments will not be paid. The prevailing market rate is 10%. What is the loan impairment loss for 2020? (Round PV factors to 2 decimals)
On December 31, 2020, BROWN Bank has a 5-year loan receivable with a face value of 6,000,000 dated January 1, 2019 due on December 31, 2023. Interest is payable annually every December 31 at 9%. The borrower made the required interest payment on December 31, 2019 but informed the bank that interest accrued for 2020 will be paid together with the principal at maturity. There is a high probability that remaining interest payments will not be paid. The prevailing market rate is 10%. What is the loan impairment loss for 2020? (Round PV factors to 2 decimals)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, BROWN Bank has a 5-year loan receivable with a face value of 6,000,000 dated January 1, 2019 due on December 31, 2023. Interest is payable annually every December 31 at 9%. The borrower made the required interest payment on December 31, 2019 but informed the bank that interest accrued for 2020 will be paid together with the principal at maturity. There is a high probability that remaining interest payments will not be paid. The prevailing market rate is 10%. What is the loan impairment loss for 2020? (Round PV factors to 2 decimals)
a. 1,046,400 |
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b. 1,504,200 |
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c.1,635,000 |
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d. 1,111,800 |
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