Reference no: EM133013927

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. (Round-off PV factors to 3 decimal places.)

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?

Problem 3 - On December 1, 2020, Jawhead Company assigned specific accounts receivable totaling P2,500,000 as collateral on a P2,000,000 12% note from Alice Bank. The entity will continue to collect the assigned accounts receivable. In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the assigned accounts. The December collections of assigned accounts receivable amounted to P1,000,000 less cash discount of P100,000. On December 31, 2020, the entity remitted the collections to the bank in payment for the interest accrued on December 31, 2020 and the note payable. The entity accepted sales returns of P50,000 on the assigned accounts and wrote off assigned accounts of P150,000.

1. What amount of cash was received from the assignment of accounts receivable on December 1, 2020?

2. What is the carrying amount of note payable on December 31, 2020?

3. What amount should be disclosed as the equity of Jawhead Company in assigned accounts on December 31, 2020?

Problem 4 - Hanzo Company factored P4,000,000 of accounts receivable to a finance entity at the beginning of the current year. Control was surrendered by Hanzo Company. The factor assessed a fee of 5% and retained a holdback equial to 10% of the accounts receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of 30 days (Use 360 days).

1. What amount was initially received by Hanzo Company from the factoring?

2. Assuming all accounts receivable are collected, what is the cost of factoring?

Problem 5 - Lesley Company factored with recourse P2,000,000 of accounts receivable with a bank. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns and sales allowances.

1. What amount of cash was received on the sale of accounts receivable?