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What present value of the expected future cash flows

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On January 1, 2019, Batac Company loaned Badoc Company amounting to P2,000,000 and received a two-year, 6%, P2,000,000. The note calls for annual interest to be paid each December 31. Batas collected the 2019 interest in the schedule. However, on December 31, 2020 based on Badoc's recent financial difficulties, Batac expects that the 2020 interest, which was recorded in the books, will not be collected and that only P1,200,000 of the principal will be recovered. The P1,200,000 principal amount is expected to be collected in two equal installments on December 31, 2022, and December 31, 2024. The prevailing interest rate for a similar type of note as of December 31, 2020 is 8%.

Required: Based on the above and the result of your audit, answer the following: (Round off present value factors to four decimal places)

Question I. The present value of the expected future cash flows as of December 31, 2020

Question II. The loan impairment loss in 2020

Question III. How much is the interest income for the year 2021?

Question IV. Carrying amount of the loan as of December 31, 2022

Reference no: EM132791664

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