Dayannara Bank loaned P5,000,000 to Dama Company on January 1, 2007. The terms of the loan require principal payments of P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on December 31, 2007. Dama Company made the required payments during 2007 and 2008. However, during 2009 Dama Company began to experience financial difficulties and was not able to pay the next installment of principal and interest, this required Dayannara to reassess the collectibility of the loan. On December 31, 2009, Dayannara determined that the remaining principal payment will be collected starting December 31, 2010 but the collection of the interest is unlikely. Assume that Dayannara accrued interest on December 31, 2009 but did not continue to accrue interest because of its uncollectibillity. The present value of 1 at 8% is as follows:For one period 0.93For two periods 0.86For three periods 0.79 . What is the loan impairment loss on December 31, 2009? A. 0 B. 420,000 C. 550,000 D. 660,000
Dayannara Bank loaned P5,000,000 to Dama Company on January 1, 2007. The terms of the loan require principal payments of P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on December 31, 2007. Dama Company made the required payments during 2007 and 2008. However, during 2009 Dama Company began to experience financial difficulties and was not able to pay the next installment of principal and interest, this required Dayannara to reassess the collectibility of the loan. On December 31, 2009, Dayannara determined that the remaining principal payment will be collected starting December 31, 2010 but the collection of the interest is unlikely. Assume that Dayannara accrued interest on December 31, 2009 but did not continue to accrue interest because of its uncollectibillity. The present value of 1 at 8% is as follows:For one period 0.93For two periods 0.86For three periods 0.79 . What is the loan impairment loss on December 31, 2009? A. 0 B. 420,000 C. 550,000 D. 660,000
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 17P
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Dayannara Bank loaned P5,000,000 to Dama Company on January 1, 2007. The terms of the loan require principal payments of P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on December 31, 2007. Dama Company made the required payments during 2007 and 2008. However, during 2009 Dama Company began to experience financial difficulties and was not able to pay the next installment of principal and interest, this required Dayannara to reassess the collectibility of the loan. On December 31, 2009, Dayannara determined that the remaining principal payment will be collected starting December 31, 2010 but the collection of the interest is unlikely. Assume that Dayannara accrued interest on December 31, 2009 but did not continue to accrue interest because of its uncollectibillity. The present value of 1 at 8% is as follows:For one period 0.93For two periods 0.86For three periods 0.79 . What is the loan impairment loss on December 31, 2009?
A. 0
B. 420,000
C. 550,000
D. 660,000
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