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Compute the expected credit loss that cusack would record

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Question - Belushi, Inc. owes Cusak County trust $40 million under a 5% note with six years remaining to maturity. Due to financial difficulties of Belushi, the previous year's interest ($2.5 mill) was not received. Cusack believes there is a 20% chance that Belushi will default on the note, and that, if Belushi defaults, the present value of all amounts Cusack eventually will collect is $22.5 mill. Compute the expected credit loss that Cusack would record as its bad debt expense.

Reference no: EM133062161

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