PROBLEM: EB Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 10% payable annually starting December 31, 2019. The loan matures in three years on December 31, 2021. The principal amount of loan is P3,500,000. In addition, direct origination cost incurred amounted to P70,000, and indirect origination cost incurred, P35,000. Finally, origination fee charged against the borrower amounted to P238,000. a) Compute for the carrying amount of the loan receivable on January 1, 2019. b) The new effective rate after considering the origination fees and costs incurred is 12%. Prepare a table of amortization for the loan receivable. c) Prepare journal entries for 2019 and 2021.
PROBLEM: EB Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 10% payable annually starting December 31, 2019. The loan matures in three years on December 31, 2021. The principal amount of loan is P3,500,000. In addition, direct origination cost incurred amounted to P70,000, and indirect origination cost incurred, P35,000. Finally, origination fee charged against the borrower amounted to P238,000. a) Compute for the carrying amount of the loan receivable on January 1, 2019. b) The new effective rate after considering the origination fees and costs incurred is 12%. Prepare a table of amortization for the loan receivable. c) Prepare journal entries for 2019 and 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PROBLEM:
EB Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 10% payable
annually starting December 31, 2019. The loan matures in three years on December 31, 2021. The
principal amount of loan is P3,500,000. In addition, direct origination cost incurred amounted to
P70,000, and indirect origination cost incurred, P35,000. Finally, origination fee charged against the
borrower amounted to P238,000.
a) Compute for the carrying amount of the loan receivable on January 1, 2019.
b) The new effective rate after considering the origination fees and costs incurred is 12%. Prepare
a table of amortization for the loan receivable.
c) Prepare journal entries for 2019 and 2021.
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