On January 1, 2011, SVTA Bank extended a P1,200,000 loan to ABC, Inc. Principal is due on December 31, 2015 but 11% interest is due annually ever December 31. On December 31, 2013, ABC, Inc. was delinquent and it was ascertained that the loan is impaired. SVTA Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2014. Accrued interest receivable on December 31, 2013 amounted to P132,000. The current market rate on December 31, 2013 is 13%. How much is the balance of allowance for impairment loss on December 31, 2013 immediately after impairment testing?

On January 1, 2011, SVTA Bank extended a P1,200,000 loan to ABC, Inc. Principal is due on December 31, 2015 but 11% interest is due annually ever December 31. On December 31, 2013, ABC, Inc. was delinquent and it was ascertained that the loan is impaired. SVTA Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2014. Accrued interest receivable on December 31, 2013 amounted to P132,000. The current market rate on December 31, 2013 is 13%. How much is the balance of allowance for impairment loss on December 31, 2013 immediately after impairment testing?

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 11E

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