Problem 15 On December 31, 2017, Entity Z acquired Lumangyao Corporation’s P1,000,000 notes for P927,880. The market interest rate at that time was 12%. The stated interest rate was 10%, payable annually. The notes mature in five years and classified as financial asset at amortized cost. At December 31, 2019, the note is considered credit impaired. Entity Z determined that it was probable that the issuer would pay back only P600,000 of the principal at maturity. At December 31, 2020, because of the improvement in the credit rating of Lumangyao, Entity Z reassessed the collectibility of the note and now expects to collect P900,000 from Lumangyao at maturity date. The required loss allowance at Dec. 31, 2019 is The impairment gain to be recognized in 2020 is
Problem 15 On December 31, 2017, Entity Z acquired Lumangyao Corporation’s P1,000,000 notes for P927,880. The market interest rate at that time was 12%. The stated interest rate was 10%, payable annually. The notes mature in five years and classified as financial asset at amortized cost. At December 31, 2019, the note is considered credit impaired. Entity Z determined that it was probable that the issuer would pay back only P600,000 of the principal at maturity. At December 31, 2020, because of the improvement in the credit rating of Lumangyao, Entity Z reassessed the collectibility of the note and now expects to collect P900,000 from Lumangyao at maturity date. The required loss allowance at Dec. 31, 2019 is The impairment gain to be recognized in 2020 is
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.1P
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Problem 15
On December 31, 2017, Entity Z acquired Lumangyao Corporation’s P1,000,000 notes for P927,880. The market interest rate at that time was 12%. The stated interest rate was 10%, payable annually. The notes mature in five years and classified as financial asset at amortized cost. At December 31, 2019, the note is considered credit impaired. Entity Z determined that it was probable that the issuer would pay back only P600,000 of the principal at maturity. At December 31, 2020, because of the improvement in the credit rating of Lumangyao, Entity Z reassessed the collectibility of the note and now expects to collect P900,000 from Lumangyao at maturity date.
- The required loss allowance at Dec. 31, 2019 is
- The impairment gain to be recognized in 2020 is
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