Reference no: EM132945028
Questions -
Q1. Shrewd Bank loaned P10,000,000 to a borrower on 1. 2015. The terms of the loan require principal payments of P2,000,000 each year for 5 years plus interest at 10%.
The first principal and interest payment is due on January 1. 2016. The borrower made the required payments during 2016 and 2017.
However, during 2017 the borrower began to experience financial difficulties, requiring the bank to reassess the collectibility of the loan.
On December 31, 2017, the bank has determined that the remaining principal payments will be collected but the collection of the interest is unlikely. The bank has accrued the interest for 2017.
The principal payments are expected to be P1,000,000 on January 1, 2018, P2,000,000 on January 1 2019 and P3,000,000 on January 1, 2020. Round off present value factors to two decimal places.
1. What is the loan impairment loss for 2017?
a. 1,180,000
b. 2,000,000
c. 1,290,000
d. 1,780,000
2. What is the interest income for 2018?
a. 531,000
b. 431,000
c. 600,000
d. 500,000
3. What is the carrying amount of the loan receivable on December 31, 2018?
a. 5,000,000
b. 4.741,000
c. 4,310,000
d. 3,122,000
Q2. On December 31, 2017 Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31 2020.
Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment.
The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2017.
The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49.
1. What is the impairment loss for 2017?
a. 752,000
b. 600,000
c. 250,000
d. 748,000
2. What is the interest income for 2018?
a. 200,000
b. 424,800
c. 224,800
d. 500,000
3. What is the carrying amount of the loan receivable on December 31, 2018?
a. 5,000,000
b. 3,750,000
c. 4,472,800
d. 4,672,800