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How much is the interest income for the year

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Q1. RM Beach Bank loaned Dynamite Company P7,500,000 on January 1, 2018. The terms of the loan were payment in full on January 1, 2023 plus interest payment at 11%. The interest payment was made as scheduled on January 1, 2019. However, due to financial setbacks, Dynamite was unable to make its 2020 interest payment. RM Beach considers the loan impaired and projects the cash flows from the loan as of December 31, 2020. Assume that the bank accrued the interest at December 31, 2019, but did not continue to accrue interest due to the impairment of the loan. The projected cash flows are: December 31, 2021- P500,000; December 31, 2022- P1,000,000; December 31, 2023- P2,000,000; December 31, 2024- P4,000,000. Using two decimal places for the present value factor, how much is the loan impairment loss on December 31, 2020?

a. P5,360,000

b. P2,140,000

c. P2,240,000

d. P2,965,000

Q2. On January 1, 2019, Coco Company sold a building for P5,000,000 to Macao Company. Macao Company paid P500,000 down and signed a noninterest-bearing notes for the balance which is payable in 3 equal annual installments every December 31 of each year. The carrying value of the building is P4,200,000. Assume the prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018. How much is the interest income for the year 2019?

a. P540,000

b. P600,000

c. P492,324

d. P432,324

Reference no: EM133093464

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