On December 31, 2020, London Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower woresend because of lower revenue On December 31, 2022, the bank determined that the borrower would oay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. 1. What is the amount of cash paid to the borrower on December 31, 2020? a. 4,400,000 b. 4,500,000 c. 5,000,000 d. 4,650,000 2. What is the carrying amount of the loan receivable on December 31, 2022? a. 4,650,000 b. 4,790,000 c. 4,772,960 d. 4,720,000 3. What is the impairment loss on loan receivable to be recognized for 2022? a. 2,000,000 b. 1,442,960 c. 1,922,960 d. 1,670,000
On December 31, 2020, London Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%.
Unfortunately, the financial condition of the borrower woresend because of lower revenue
On December 31, 2022, the bank determined that the borrower would oay back only P3,000,000 of the principal at maturity.
However, it was considered likely that interest would continue to be paid on the P5,000,000 loan.
The present value of 1 at 12% is .57 for five periods and .71 for three periods.
The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods.
1. What is the amount of cash paid to the borrower on December 31, 2020?
a. 4,400,000
b. 4,500,000
c. 5,000,000
d. 4,650,000
2. What is the carrying amount of the loan receivable on December 31, 2022?
a. 4,650,000
b. 4,790,000
c. 4,772,960
d. 4,720,000
3. What is the impairment loss on loan receivable to be recognized for 2022?
a. 2,000,000
b. 1,442,960
c. 1,922,960
d. 1,670,000
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