On December 31, 2021, Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024.Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment. The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49. What is the carrying amount of the loan receivable on December 31, 2022? a. 5,000,000 O b. 3,750,000 O c. 4,472,800 O d. 4,672,800
On December 31, 2021, Oregon Bank recorded an investment of P5,000,000 in a loan granted to a client. The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at maturity on December 31, 2024.Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full payment. The bank projected that the entire principal will be paid at maturity and 4% interest or P200,000 will be paid annually on December 31 of the next three years. There is no accrued interest on December 31, 2021.The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49. What is the carrying amount of the loan receivable on December 31, 2022? a. 5,000,000 O b. 3,750,000 O c. 4,472,800 O d. 4,672,800
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 17P
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Transcribed Image Text:On December 31, 2021, Oregon Bank recorded an investment of P5,000,000 in a
loan granted to a client. The loan has a 10% effective interest rate payable
annually every December 31. The principal is due in full at maturity on December
31, 2024.Unfortunately, the borrower is experiencing significant financial
difficulty and will have difficult time in making full payment. The bank projected
that the entire principal will be paid at maturity and 4% interest or P200,000 will
be paid annually on December 31 of the next three years. There is no accrued
interest on December 31, 2021.The present value of 1 at 10% for three periods is
0.75, and the present value of an ordinary annuity of 1 at 10% for three periods is
2.49. What is the carrying amount of the loan receivable on December 31, 2022?
a. 5,000,000
O b. 3,750,000
O c. 4,472,800
O d. 4,672,800
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