Reference no: EM132983614
PROBLEM 1 - Complete solution with explanation PROBLEM 1 - LUNOX 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 1 at 11% for 5 periods is 0.593; Present value of an ordinary annuity at 11% for 5 periods is 3.696.
- At what amount should the loan receivable be initially recognized?
- How much is the interest income in 2020?
- What is the balance of direct origination cost on December 31, 2020?
- At what amount should the loan receivable be reported in the financial statements on December 31, 2020?
PROBLEM 2 - TIGREAL - On January 1, 2020, Tigreal Bank 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.
- How much is the impairment loss recognized in 2021?
- How much interest income is recognized in 2022?
- How much is the balance of allowance for loan impairment on December 31, 2022?
- How much interest income is recognized in 2023?
PROBLEM 3 - ALDOUS - Aldous Company accepted from a customer P5,000,000 face amount, 6-month, 8% note dated at the beginning of the current year. On the same date, Aldous discounted the note with recourse at the bank at a 10% discount rate. The discounting is accounted for as a secured borrowing. What is the interest expense to be recognized on the date of discounting?
PROBLEM 4 - LING - Ling Company accepted from a customer P5,000,000 face amount, 6-month, 8% note dated at the beginning of the current year. On the same date, Ling discounted the note with recourse at the bank at a 10% discount rate. The discounting is accounted for as a conditional sale. What is the interest expense to be recognized on the date of discounting?
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