Reference no: EM132973533

On January 1, 2020, YZA Inc. gave a loan to ABC Corp. amounting to P1,000,000 and received a three-year, 6% note. The note calls for annual interest to be paid each December 31. The company incurred origination costs amounting to __?__. The company charged P80,000 to ABC as origination fees. As a result, the yield on the loan was at 8%. According to the company's initial estimates, based on ABC Corp.'s good financial standing, there is neither 12-months expected credit loss (ECL) nor lifetime expected credit loss. Furthermore, the probability of default (PD) is 0%.

Required:

Problem 1. What is the origination cost incurred by YZA on January 1, 2020 in relation to the loans receivable?

Problem 2. What is the amortized cost of the loan as of December 31, 2021 and the  orresponding interest income by the end of 2021?

Problem 3. Assuming that, on December 31, 2021, based on ABC's financial crisis YZA was not able to collect the 2021 interest and that only P600,000 of the principal due December 31, 2022 will be collected. The P600,000 principal is expected to be collected in two equal installments on December 31, 2023 and December 31, 2024. After reviewing all available evidence at December 31, 2021, it was determined that the receivable is credit-impaired and that impairment loss should be recognized. What is the impairment loss in 2021?

Problem 4. Assuming that, based on the company's initial estimates, on the origination date (January 1, 2020), based on the company's initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 8% is at P100,000. The probability of default (PD) is at 12%, what is the initial carrying value of the loans receivable and how much in bad debt expense/credit loss should be immediately recognized?

Problem 5. Using the assumption in number 4, assuming further that: a) there was no evidence of significant increase in credit risk by the end 2020; b) that the receivable is determined to have "low credit risk"; and, c) that there were no changes in its initial estimate of the 12 months expected credit loss, what is the carrying value of the loans receivable as of December 31, 2020?

Problem 6. Continuing on with the assumptions in numbers 4 and 5, assuming further that by the end of 2021 while interest due was promptly collected, based on available forward-looking information however (determinable without undue cost or effort), there is an evidence that there was a significant increase in credit risk. YZA Inc. therefore had to change its basis of calculation of the loss allowance from 12 months ECL to lifetime expected credit loss. The present value of the lifetime expected credit loss discounted at 8% is at P400,000. The probability of default (PD) is at 20%. What is the carrying value of the loans receivable as of December 31, 2021
and how much in bad debt expense/credit loss should be recognized in 2021?

Problem 7. Continuing on with assumptions in numbers 4, 5 and 6, assuming further that, on December 31, 2022, based on ABC's financial crisis YZA was not able to collect the supposed amounts receivable at maturity date and that only P600,000 of the principal and interest due on December 31, 2022 will be collected. The amount is expected to be collected in two equal installments on December 31, 2023 and December 31, 2024. After reviewing all available evidence at December 31, 2022, it was determined that the receivable is credit-impaired and that impairment loss should be recognized. What is the impairment loss in 2022