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Determine the loss on impairment

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Question - On December 31, 2017, Cheyenne Company signed a $1,054,800 note to Ayayai Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Cheyenne's financial situation worsened. On December 31, 2019, Ayayai Bank determined that it was probable that the company would pay back only $632,880 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,054,800 loan.

Determine the loss on impairment that Ayayai Bank should recognize on December 31, 2019.

Reference no: EM132141529

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