On December 31, 2021, The Essence Finance Company had P5,000,000 note receivable from Galena Company. The note bears 10% interest. The books reported accrued interest of P500,000 on this date. Because of financial distress being suffered by Galena Company, Essence Finance agreed to the restructuring and modification of the terms of its loan as follows: reduction of principal to P4,000,000; reduction of interest to 8% payable annually beginning Dec 31, 2022; accrued interest on December 31, 2021 is condoned and the principal payment was reset to December 31, 2024. How much is impairment loss should Essence Finance record on December 31, 2021?

On December 31, 2021, The Essence Finance Company had P5,000,000 note receivable from Galena Company. The note bears 10% interest. The books reported accrued interest of P500,000 on this date. Because of financial distress being suffered by Galena Company, Essence Finance agreed to the restructuring and modification of the terms of its loan as follows: reduction of principal to P4,000,000; reduction of interest to 8% payable annually beginning Dec 31, 2022; accrued interest on December 31, 2021 is condoned and the principal payment was reset to December 31, 2024. How much is impairment loss should Essence Finance record on December 31, 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 30E

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On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.
On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
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