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How much is the impairment loss to be recognized on december

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Noel Bank loaned 9,000,000 to a borrower on January 1, 2017. The terms of the loan were payment in full on January 1, 2022, plus annual interest payment at 12%. The debtor paid interest on January 1, 2018 as scheduled. However, due to financial setbacks, the debtor was unable to pay interest on 2019. Noel Bank accrued interest on Dec. 31, 2018 but did not continue to accrue interest for 2019 due to considered impairment of the loan.

On December 31, 2019, Noel Bank projected these cash flows:

December 31, 2020 - 1,500,000
December 31, 2021 - 2,000,000
December 31, 2022 - 3,000,000
December 31, 2023 - 2,500,000

The present value of 1 at 12% is as follows:

For 1 period - 0.8929
For 2 periods - 0.7972
For 3 periods - 0.7118
For 4 periods - 0.6355

Problem a. How much is the impairment loss to be recognized on December 31, 2019?

Problem b. How much should be recognized as interest income for 2020?

Reference no: EM132791681

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