What is the amortized cost of the instrument on December

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Question - On January 2, 2018, Estrella Company originates a 10-year 7% P4,000,000. The loan carries an annual interest rate of 7% and is payable at the end of year 10 (December 31, 2027). Estrella charges a 1.25% non-refundable loan origination fee to the borrower and also incurs P100,000 in direct origination costs. The contract specifies that the borrower has an option to pre-pay the instrument at approximately equal to instrument's amortized cost at each exercise date, and that no penalty will be charged for pre-payment. But at the inception of the contract, Estrella expects the borrower not to pre-pay, the amortization period is equal to the instrument's full term and for that reason, the effective yield rate is determined at 6.823%.

What is the amortized cost of the instrument on December 31, 2019? (Support with amortization table and other computations).

Reference no: EM132928653

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