Reference no: EM133012112
Problem 1 - On January 1, 2020, Lunox Bank granted a 12%, P5,000,000 loan to Nana Company. The loan is payable in 5 years. Interest is payable every end of the year. The bank incurred origination costs of P281,100. Nana company was charged P98,500 of origination fees. Present value of 1 at 10% for 5 periods is 0.621; Present value of an ordinary annuity at 11% for 5 periods is 3.696
1. How much is the interest income in 2020?
2. What is the balance of direct origination cost on December 31, 2020?
3. At what amount should the loan receivable be reported in the financial statements on December 31, 2020?
4. At what amount should the loan receivable be initially recognized?
Problem 2 - On January 1, 2020, Tigreal granted a 10%, P3,000,000 loan to Kagura Company. The principal is payable on December 31, 2023, and interest payments are at the end of the year. On December 31, 2021, Kagura defaulted on the payment of interest, because of financial difficulty. The loan is assessed to be impaired. The annual interest can no longer be collected. Additionally, the principal is to be collected in three annual payments starting December 31, 2025.
1. How much is the impairment loss recognized in 2021?
2. How much interest income is recognized in 2022?
3. How much is the balance of allowance for loan impairment on December 31, 2022?
4. How much interest income is recognized in 2023?
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