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Compute the present value of the loan receivable on December

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Problem - On December 31, 2019, Durable bank has a loan receivable of P4,000,000 from the borrower that it is carrying at face amount and is due on December 31, 2024. Interest on the loan is payable at 9% each December 31. The borrower paid the interest due on December 31, 2019 but informed the bank that it would probably miss the next two years' interest payments because of financial difficulty. After that, the borrower is expected to resume the annual interest payment but it would make the principal payment one year late, with interest paid for that additional year at the time of principal payment.

Required -

1. Compute the present value of the loan receivable on December 31, 2019.

2. Compute the impairment loss to be recognized on December 31, 2019.

3. Prepare journal entries for 2019 to 2025.

Reference no: EM132691869

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