What amount should be reported as interest income

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On January 1, 2021, Merlin Bank made a P1,000,000, 8% loan. The P80,000 interest is receivable at the end of each year, with the principal amount to be received at the end of five years. At the end of 2021, the first year's interest of P80,000 has not yet been received because the borrower is experiencing financial difficulties. The borrower negotiated a restructuring of the loan. The payment of all of the interest for 5 years will be delayed until the end of the 5-year loan term. In addition, the amount of principal repayment will be dropped from P1,000,000 to P500,000. The PV of 1 at 8% for 4 periods is .735. No interest revenue has been recognized in 2021 in connection with the loan.

1. What amount should be reported as loan impairment loss for 2021? Show solutions.

2. What amount should be reported as interest income for 2022? Show solutions.

Reference no: EM133272763

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