On January 1, 2019, Lala Company received an P800,000, 8%, 2 year note from Move Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Move Corporation was in financial crisis, and as a result of this development, Lala Company expects that the interest accruing for 2020 will be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9%. What amount of impairment loss/bad debts should Lala Company recognize on December 31, 2020 related to its note receivable?
On January 1, 2019, Lala Company received an P800,000, 8%, 2 year note from Move Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time.
In 2020, Move Corporation was in financial crisis, and as a result of this development, Lala Company expects that the interest accruing for 2020 will be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9%.
What amount of impairment loss/
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