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What amount of interest income is recognized

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Q1. On Jan. 1, 20x1, Welcome Bank extended a 4 year, P500,000, zero interest loan to a client. The borrower received loan proceeds of P500,000 and that amount is due in lump sum at maturity. The prevailing interest rate for this type of loan is 12%. What is the net effect of the loan on Welcome's profit in 20x1?

a. (182,240)

b. (144,109)

c. 38,131

d. 0

Q2. Appease Co. recognized impairment loss of P623,246 on its credited-impaired loan receivable with previous carrying amount of P820,000. The loan bears zero interest is due in lump sum at maturity date. The current rate on impairment testing date was 12%, while the original effective interest rate was 10%. What amount of interest income is recognized on the loan in the period immediately following the impairment?

a. 757,675

b. 787,634

c. 890,606

d. 909,210

Reference no: EM133026585

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