What amount of loss on factoring should be recognized

Reference no: EM132706202

Questions -

Q1. EASY Bank - On January 1, 2020, Easy Bank loaned 4,500,000 to a borrower. The contract specified that the loan had a 6-year term and a 9% interest rate. Interest is payable annually every December 31 and the principal amount will be collected on December 31, 2025. Interest is collected for 2020. On December 31, 2020, the bank determined that the loan has a 12-month probability of default of 10% and expected to collect only 95% of the loan. On December 31, 2021 , the bank determined that there is a significant decline in the credit rating of the borrower which the Bank concludes that there is a significant increase in the credit risk of the loan. However, there is still no objective evidence of impairment upon Easy's assessment. Based on the relevant information, the bank concluded that there is a 30% probability of default over the remaining term of the loan and it is expected that only 60% of the loan will be collected. Interest is collected for 2021. On December 31, 2022, the borrower was under financial difficulty and the loan was considered impaired because there is now objective evidence of impairment. The bank agreed that only 40% of the principal will be collected on due date. Interest is collected for 2022.

The present value of 1 at 9% is .65 for 5 periods, .71 for 4 periods and .77 for three periods. The entity decided to apply general approach of determining the loan impairment in accordance with PFRS 9.

Question 1: What amount should be recognized as impairment loss for 2020?

a. 172,125

b. 124,500

c. 1,721,250

d. 1,245,000

e. some other answer

Question 2: What amount should be recognized as interest income for 2021?

a. 405,000

b. 270,000

c. 267,759

d. 223,506

e. some other answer

Question 3: What amount should be recognized as impairment loss for 2021?

a. 602,775

b. 392,100

c. 516,600

d. 774,900

e. some other answer

Question 4: What amount should be recognized as impairment loss for 2022?

a. 2,076,000

b. 1,559,400

c. 3,114,000

d. 0

e. some other answer

Q2. JIMMY BUCKETS FOODS Inc. - JIMMY BUCKETS FOODS factored 3,000,000 of accounts receivable without recourse. The factor required an assessment fee of 10% of the accounts factored and a holdback of 15% of the accounts factored for possible sales returns and allowances. The accounts factored had related allowance for doubtful accounts of 200,000. What amount of loss on factoring should be recognized?

a. 100,000

b. 300,000

c. 650,000

d. 750,000

e. some other answer

Reference no: EM132706202

Questions Cloud

Calculate earnings per share : Oriole had 45,000 common shares outstanding all year. Calculate earnings per share (EPS) for 2020 as it should be reported to shareholders

What is the difference between risc and cisc : What is the special register in a CPU that holds the address of the next instruction? What is the difference between RISC and CISC?

How do post and balance the premises and plant accounts : Sema plc, a company in the heavy engineering industry, Post and balance the premises and plant accounts for the 2016 financial year.

Prepare presentation about wireless attacks : "Lake Point Consulting Services (LPCS) provides security consulting and assurance services to over 500 clients across a wide range of enterprises in more than.

What amount of loss on factoring should be recognized : The accounts factored had related allowance for doubtful accounts of 200,000. What amount of loss on factoring should be recognized

Compute how much will each of newly grads have at retirement : Consider Donald and Joe who are both 30- years of age, Compute How much will each of the newly grads have at retirement.?

Discuss disadvantages of remote authentication protocols : Discuss both advantages and disadvantages of remote authentication protocols and how business will use them. All paper are written in APA formatting.

Solve the annual payments for speedo : How do Calculate the annual payments. Speedo's agreed to pay the balance in 10 equal end-of-year instalments and 10% interest on the declining balance.

Differentiation between visualizations within presentation : If you are using colours in your presentation, how do you choose effective colours that provide good differentiation between the visualizations.

User Account

All Pages