On December 31, 2021, 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 worsened because of lower revenue. On December 31, 2023, the bank determined that the borrower would pay 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. What is the impairment loss to be recognized on December 31, 2023? O a. 2,000,000 O b. 1,442,960 O c. 1,922,960 O d. 1,670,000
On December 31, 2021, 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 worsened because of lower revenue. On December 31, 2023, the bank determined that the borrower would pay 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. What is the impairment loss to be recognized on December 31, 2023? O a. 2,000,000 O b. 1,442,960 O c. 1,922,960 O d. 1,670,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, 2021, 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 worsened because of lower revenue. On December 31,
2023, the bank determined that the borrower would pay 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. What is the
impairment loss to be recognized on December 31, 2023?
a. 2,000,000
O b. 1,442,960
O c. 1,922,960
O d. 1,670,000
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