On January 1, 2011, ACB Inc. gave a loan to XYZ Enterprises amounting to P100,000 and received a two year, six percent P100,000 note. The note calls for annual interest to be paid each December 31. The company collected the 2015 interest on schedule. At December 31, 2016, however, based on XYZ's recent financial problems, ABC expects that the 2012 interest will not be collected and that only P60,000 of the principle due December 31, 2012 will be collected. The P60,000 principal amount is expected to be collected in two equal installments on December 31, 2014 and December 31, 2016. ABC believes that 6% is the market's assessment of the time value of money. 1. What entries should be made in the records of ABC company on December 31, 2012? 2. Assume that ABC Inc. collects the expected payments from XYZ. What entries should be made on December 31, 2013? December 31, 2014 December 31, 2015 and December 31, 2016?
On January 1, 2011, ACB Inc. gave a loan to XYZ Enterprises amounting to P100,000 and received a two year, six percent P100,000 note. The note calls for annual interest to be paid each December 31. The company collected the 2015 interest on schedule. At December 31, 2016, however, based on XYZ's recent financial problems, ABC expects that the 2012 interest will not be collected and that only P60,000 of the principle due December 31, 2012 will be collected. The P60,000 principal amount is expected to be collected in two equal installments on December 31, 2014 and December 31, 2016. ABC believes that 6% is the market's assessment of the time value of money.
1. What entries should be made in the records of ABC company on December 31, 2012?
2. Assume that ABC Inc. collects the expected payments from XYZ. What entries should be made on December 31, 2013? December 31, 2014 December 31, 2015 and December 31, 2016?
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