Reference no: EM132863724
Question - Solid Bank loaned P5,000,000 to a borrower on January 1, 2018. The terms of the loan require principal payments of P 1,000,000 each year for 5 years plus interest at 8%.
The first principal and interest payment is due on January 1, 2019. The borrower made the required payments during 2019 and 2020.
However, during 2020 the borrower began to experience financial difficulties, requiring the bank to reassess the collectibility of the loan.
On December 31, 2020, the bank has determined that the remaining principal payment will be collected as originally scheduled but the collection of the interest is unlikely.
The bank did not accrue the interest on December 31, 2020.
Present value of 1 at 8%
For one period 0.926
For two periods 0.857
For three periods 0.794
Required -
1. What is the impairment loss for 2020?
2. What is the interest income for 2021?
3. What is the carrying amount of the loan receivable on December 31, 2021?
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