Record the impairment loss using direct method

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Question - Loans Receivable - On Jan. 31, 20x1, RPB extended a P2,000,000 loan to XYZ, Inc. Principal is due on Dec. 31, 20x5 but 10% interest is due annually every Dec.31. On Dec.31, 20x3, XYZ, Inc. was delinquent and it was ascertained that the loan was impaired. SP Bank assessed that the interests accruing on the loan will not be collected; however, the principal is expected to be received in two equal annual installments starting on Dec. 31, 20x4. Interest receivable as of Dec. 31, 20x3 includes only the unpaid interest in 20x2. Interest for 20x3 is not accrued because of the loss event. The current market rate on Dec. 31, 20x3 is 14%.

Requirements -

a) Prepare the journal entry to record the impairment loss using direct method (1) and allowance method (2).

b) Prepare the amortization table.

Reference no: EM132911479

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