On December 31, 2021, Cholo Bank recorded an investment of P 5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024. Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment. The bank projected the entire principal will be paid at maturity and 200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021. The present value of 1 @ 10% for three periods 0.75 The present value of an ordinary annuity of 1 at 10% 2.49 What is the impairment loss for 2021?
On December 31, 2021, Cholo Bank recorded an investment of P 5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024.
Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment.
The bank projected the entire principal will be paid at maturity and 200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021.
|
The present value of 1 @ 10% for three periods |
0.75 |
|
The present value of an ordinary annuity of 1 at 10% |
2.49 |
What is the impairment loss for 2021?
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