Reference no: EM132833044

Question -

Q1. LLB Bank granted a loan to a borrower in the amount of P5,000,000 on January 1, 2020. The interest rate on the loan is 10% payable annually starting December 31, 2020. The loan matures in five years on December 31, 2024. LLB Bank incurs P39,400 of direct loan origination cost and P10,000 of indirect loan origination cost. In addition, LLB bank charges the borrower an 8% non-refundable loan origination fee.

Required - Based on the above information, answer the following: (Round off the present value to four decimal places)

I. The carrying amount of the loan as of January 1, 2020 is

II. The effective interest rate of the loan is

III. The interest income to be recognized in 2020 is

IV. The carrying amount of the loan as of December 31, 2020 is

Q2. On January 1, 2019, Batac Company loaned Badoc Company amounting to P2,000,000 and received a two-year, 6%, P2,000,000. The note calls for annual interest to be paid each December 31. Batas collected the 2019 interest in the schedule. However, on December 31, 2020 based on Badoc's recent financial difficulties, Batac expects that the 2020 interest, which was recorded in the books, will not be collected and that only P1,200,000 of the principal will be recovered. The P1,200,000 principal amount is expected to be collected in two equal installments on December 31, 2022, and December 31, 2024. The prevailing interest rate for a similar type of note as of December 31, 2020 is 8%.

Required - Based on the above and the result of your audit, answer the following: (Round off present value factors to four decimal places)

I. The present value of the expected future cash flows as of December 31, 2020?

II. The loan impairment loss in 2020?

III. How much is the interest income for the year 2021?

IV. Carrying amount of the loan as of December 31, 2022?