Reference no: EM133041521
Question - LANEC Bank loaned P 10,000,000 to a borrower on January 1, 2016. The terms of the loan require principal payments of P 2,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on December 31, 2016. However, during 2018 the borrower began to experience financial difficulties, requiring the bank to reassess the collectibility of the loan.
On December 31, 2018, 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 2018. The principal payments are expected to be P 1,000,000 on December 31, 2019; P 2,000,000 on December 31, 2020; and P 3,000,000 on December 31, 2021. The present value of 1 at 8% for one period is 0.93, for two periods is 0.86, and for three periods is 0.79.
Required - What is the carrying value of loans receivable at December 31, 2018?
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