On December 31, 2023, JFG Company, a financing institution, lent P4,000,000 to MFG Company due 3 years after. The loan is supported by an 8% note receivable. Transaction costs incurred to originate the loan amounted to P248,000. P374,000 was chargeable to MFG as origination fees. Interest on the loan is collectible at the end of each year. The yield rate on the loan after considering the direct origination fees and origination costs incurred
On December 31, 2023, JFG Company, a financing institution, lent P4,000,000 to MFG Company due 3 years after. The loan is supported by an 8% note receivable. Transaction costs incurred to originate the loan amounted to P248,000. P374,000 was chargeable to MFG as origination fees. Interest on the loan is collectible at the end of each year. The yield rate on the loan after considering the direct origination fees and origination costs incurred
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![PROBLEM 1
On December 31, 2023, JFG Company, a financing institution, lent
P4,000,000 to MFG Company due 3 years after. The loan is
supported by an 8% note receivable. Transaction costs incurred to
originate the loan amounted to P248,000. P374,000 was
chargeable to MFG as origination fees. Interest on the loan is
collectible at the end of each year. The yield rate on the loan after
considering the direct origination fees and origination costs incurred
is 9.25%.
JFG was able to collect interest as it became due at the end of
2024. During 2025, however, due to MFG Company's business
deterioration and due to political instability and faltering global
economy, the company was not able to collect amounts due at the
end of 2025. After reviewing all available evidence at December 31,
2025, JFG determined that it was probable that MFG would pay
back only P3,400,000 collectible as follows:
December 31, 2027
December 31, 2028
December 31, 2029
December 31, 2030
P1,400,000
1,000,000
600,000
400,000
As of December 31, 2025, the prevailing rate of interest for all debt
instruments is 14%. Moreover, JFG Company accrued the interest
on December 31, 2025.
Based on the above and the result of your audit, answer the
following: (Round off PV factors to 4 decimal places)
1. What is the carrying amount of the loan receivable as of
December 31, 2024?
2. What is the loan impairment loss to be recognized in the 2025
statement of comprehensive income?
3. What is the interest income to be recognized in the 2027
statement of comprehensive income?
4. What is the carrying amount of the loan receivable as of
December 31, 2027?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcee4e17b-b64f-4e0d-867e-9f3c616f3f6f%2Fcdb7bfaa-6f81-49ce-9c6a-827f1fcbafad%2Fy0c1x5s_processed.jpeg&w=3840&q=75)
Transcribed Image Text:PROBLEM 1
On December 31, 2023, JFG Company, a financing institution, lent
P4,000,000 to MFG Company due 3 years after. The loan is
supported by an 8% note receivable. Transaction costs incurred to
originate the loan amounted to P248,000. P374,000 was
chargeable to MFG as origination fees. Interest on the loan is
collectible at the end of each year. The yield rate on the loan after
considering the direct origination fees and origination costs incurred
is 9.25%.
JFG was able to collect interest as it became due at the end of
2024. During 2025, however, due to MFG Company's business
deterioration and due to political instability and faltering global
economy, the company was not able to collect amounts due at the
end of 2025. After reviewing all available evidence at December 31,
2025, JFG determined that it was probable that MFG would pay
back only P3,400,000 collectible as follows:
December 31, 2027
December 31, 2028
December 31, 2029
December 31, 2030
P1,400,000
1,000,000
600,000
400,000
As of December 31, 2025, the prevailing rate of interest for all debt
instruments is 14%. Moreover, JFG Company accrued the interest
on December 31, 2025.
Based on the above and the result of your audit, answer the
following: (Round off PV factors to 4 decimal places)
1. What is the carrying amount of the loan receivable as of
December 31, 2024?
2. What is the loan impairment loss to be recognized in the 2025
statement of comprehensive income?
3. What is the interest income to be recognized in the 2027
statement of comprehensive income?
4. What is the carrying amount of the loan receivable as of
December 31, 2027?
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