Reference no: EM132788964
Questions -
Q1. On January 1 ,2020 ABC Company sold a building and received as consideration P1,000,000 cash and P4,000,000 noninterest bearing note due on January 1, 2023. There was no established exchange price for the building and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2020 was 10%. The present value of 1 at 10% for three periods is 0.75 and the present value of annuity of 1 at 10% for three periods is 2.4869. What amount of interest revenue should be reported for 2021?
Q2. On January 1, 2020 DEF Company sold machineries with a carrying amount of P4,800,000 in exchange for a P6,000,000 noninterest-bearing note due January 1, 2023. There was no established exchange price for the machineries. The prevailing rate of interest for similar note was 10%. The present value of 1 at 10% for three periods is 0.75 and the present value of annuity of 1 at 10% for three periods is 2.4869. Compute the interest income for 2020.
Q3. On January 1, 2020 DEF Company sold machineries with a carrying amount of P4,800,000 in exchange for a P6,000,000 noninterest-bearing note due January 1, 2023. There was no established exchange price for the machineries. The prevailing rate of interest for similar note was 10%. The present value of 1 at 10% for three periods is 0.75 and the present value of annuity of 1 at 10% for three periods is 2.4869. Compute for the gain or (loss) on sale of machineries for 2020?
Q4. At year-end, GHI Co. received two P1,000,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from XXX Corp., made under customary trade terms, is due in nine months and the note from UUU Company is due in five years. The market interest rate for similar notes was 8%. The present value of 1 due in nine months is 0.944 and the present value of 1 due in five years is 0.68. The present value of annuity of 1 at 8% for five year is 3.9927. At what amount should the note receivable from XXX Corp. be reported at year-end?
Q5. At year-end, GHI Co. received two P1,000,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from XXX Corp., made under customary trade terms, is due in nine months and the note from UUU Company is due in five years. The market interest rate for similar notes was 8%. The present value of 1 due in nine months is 0.944 and the present value of 1 due in five years is 0.68. The present value of annuity of 1 at 8% for five year is 3.9927. At what amount should be the note receivable from UUU Company be reported at year-end?
Q6. On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the amount of cash paid to the borrower on December 31, 2020.
Q7. On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the carrying amount of the loan receivable on December 31, 2022.
Q8. On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the impairment loss on loan receivable to be recognized in 2022?
Q9. MNO Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 10% payable annually starting December 31, 2020. The loan matures in three years on December 31, 2022. Additional information is as follows: Principal amount of P5,000,000; Direct origination cost incurred for P100,000; Indirect origination cost incurred for P50,000 and Origination fee received from the borrower was P340,000. After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%. Compute for the interest income for 2020.
Q10. MNO Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 10% payable annually starting December 31, 2020. The loan matures in three years on December 31, 2022. Additional information is as follows: Principal amount of P5,000,000; Direct origination cost incurred for P100,000; Indirect origination cost incurred for P50,000 and Origination fee received from the borrower was P340,000. After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%. Compute for the carrying amount of the loan receivable on December 31, 2020.