Cozy Bank loaned a borrower P7,500,000 on January 1, 2018.Problem 7-6 (IAA)The terms of the loan were payment in full on2023, plus annual interest payment at 12%.January 1,The interest payment was made as scheduled on2019. However, due to financial setbacks, the borrower wunable to make the 2020 interest payment.January 1,The bank considered the loan impaired and projected thecash flows from the loan on December 31, 2020.The bank accrued the interest on December 31, 2019, but dianot continue to accrue interest for 2020 due to thimpairment of the loan.Projected cash flowsAmount projectedon December 31, 2020Date of cash flowDecember 31, 2021December 31, 2022December 31, 2023December 31, 2024500,0001,000,0002,000,0004,000,000Present value of 1 at 12%For one periodFor two periodsFor three periodsFor four periods0.890.800.710.64Required:1. Compute the present value of the loan receivable onDecember 31, 2020.2. Compute the impairment loss on the loan receivable.Prepare journal entries for 2020, 2021 and 2022.212

Loan is described as an amount which one party provides to another party who is in the need of…

Problem 7-6 (IAA) Cozy Bank loaned a borrower P7,500,000 on January 1, 2018. The terms of the loan were payment in full on 2023, plus annual interest payment at 12%. January 1, The interest payment was made as scheduled on 2019. However, due to financial setbacks, the borrower unable to make the 2020 interest payment. January 1, The bank considered the loan impaired and projected th. cash flows from the loan on December 31, 2020. The bank accrued the interest on December 31, 2019, but dia not continue to accrue interest for 2020 due to the impairment of the loan. Projected cash flows Amount projected on December 31, 2020 Date of casbh flow December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 500,000 1,000,000 2,000,000 4,000,000 Present value of 1 at 12% 0.89 For one period For two periods For three periods For four periods 0.80 0.71 0.64 Required: 1. Compute the present value of the loan receivable on December 31, 2020. Compute the impairment loss on the loan receivable. 3. Prepare journal entries for 2020, 2021 and 2022. 212

Problem 7-6 (IAA) Cozy Bank loaned a borrower P7,500,000 on January 1, 2018. The terms of the loan were payment in full on 2023, plus annual interest payment at 12%. January 1, The interest payment was made as scheduled on 2019. However, due to financial setbacks, the borrower unable to make the 2020 interest payment. January 1, The bank considered the loan impaired and projected th. cash flows from the loan on December 31, 2020. The bank accrued the interest on December 31, 2019, but dia not continue to accrue interest for 2020 due to the impairment of the loan. Projected cash flows Amount projected on December 31, 2020 Date of casbh flow December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 500,000 1,000,000 2,000,000 4,000,000 Present value of 1 at 12% 0.89 For one period For two periods For three periods For four periods 0.80 0.71 0.64 Required: 1. Compute the present value of the loan receivable on December 31, 2020. Compute the impairment loss on the loan receivable. 3. Prepare journal entries for 2020, 2021 and 2022. 212

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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