Problem 7-4 (IFRS)On January 1, 2019, Empress Bank granted a loan to aborrower. The interest on the loan is 10% payable annually onDecember 31, 2019. The loan matures in three years onDecember 31, 2021.Principal amountDirect origination cost incurredOrigination fee charged against the borrower5,000,000457,500200,000After considering the origination fee charged against theborrower and the direct origination cost incurred, the effectiverate on the loan is 8%.Required:1. Determine the carrying amount of the loan on January 1,2019.2. Prepare a table of amortization of the direct originationcost.3. Prepare journal entries for 2019, 2020 and 2021.

Summarized the information provided in the question on Jan 1,2020, Express bank granted a loan to a…

Problem 7-4 (IFRS) On January 1, 2019, Empres borrower. The interest on the loa December 31, 2019. The loan December 31, 2021. Principal amount Direct origination cost incurred Origination fee charged against the bo

Problem 7-4 (IFRS) On January 1, 2019, Empres borrower. The interest on the loa December 31, 2019. The loan December 31, 2021. Principal amount Direct origination cost incurred Origination fee charged against the bo

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 7-4 (IFRS)
On January 1, 2019, Empress Bank granted a loan to a
borrower. The interest on the loan is 10% payable annually on
December 31, 2019. The loan matures in three years on
December 31, 2021.
Principal amount
Direct origination cost incurred
Origination fee charged against the borrower
5,000,000
457,500
200,000
After considering the origination fee charged against the
borrower and the direct origination cost incurred, the effective
rate on the loan is 8%.
Required:
1. Determine the carrying amount of the loan on January 1,
2019.
2. Prepare a table of amortization of the direct origination
cost.
3. Prepare journal entries for 2019, 2020 and 2021.

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