Problem 7-14 (IAA)On December 31, 2021, Oregon Bank recorded an investmentof P5,000,000 in a loan granted to a client.The loan has a 10% effective interest rate payable annuallyevery December 31. The principal is due in full at maturityon December 31, 2024.Unfortunately, the borrower is experiencing significantfinancial difficulty and will have difficult time in making fullpayment.The bank projected that the entire principal will be paid atmaturity and 4% interest or P200,000 will be paid annuallyon December 31 of the next three years. There is no accruedinterest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, andthe present value of an ordinary annuity of 1 at 10% for threeperiods is 2.49.1. What amount should be reported as impairment loss for2021?a. 752,000b. 600,000c. 250,000d. 748,0002. What amount should be reported as interest income for2022?a. 200,000b. 424,800c. 224,800d. 500,0003. What is the carrying amount of the loan receivable onDecember 31, 2022?a. 5,000,000b. 3,750,000c. 4,472,800d. 4,672,800

SOLUTION WORKING NOTE- TOTAL PRESENT VALUE OF CASH FLOWS- PRESENT VALUE OF PRINCIPLE…

Answered: Problem 7-14 (IAA) On December 31,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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