Reference no: EM133092776

Questions -

Q1. On December 31, 2020, the Daniel Finance Company had a P5,000,000 note receivable from Hosea Company. The note bears 10% interest. The books reported accrual interest of P500,000 on this date. Because of financial distress suffered by Hosea Company, Daniel Finance agreed to the restructuring and modification of the terms as follows:

Reduction of principal to P4,000,000;

Reduction of interest to 8% payable annually beginning December 31, 2021;

Accrued interest on December 31, 2020 is condoned; and

Principal payment was reset to December 31, 2023.

How much impairment loss should Jeremiah record on Dec. 31, 2020 as a result of restructuring (use four decimal places for the PV factors)?

Q2. On January 1, 2019, Joel Corp. loaned P3,000,000 to Amos Company. Under the loan agreement, Amos Company is to make an annual principal payment of P600,000 for 5 years plus interest at 8%. The first principal payment is due on January 1, 2020. The required payments were made by Amos Company for 2020 and 2021. However, during 2021, Amos Company began to face financial difficulties requiring Joel Corp. to reevaluate the collectivity if the loan. On December 31, 2021, Joel Corp. determines that it will be able to collect the remaining principal, but unlikely that the interest will be collected. (Use present value factor at five decimal places). What is the amount of loan impairment on December 31, 2021?