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Problem 25 Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the payment in full on January 1, 2023, plus annual interest payment at 12%. The intere was made as scheduled on January 1, 2019. However, due to financial setbacks, the was unable to make its 2020 interest payment and Davao Bank considers the loan im projects the cash flows from the loan as of December 31, 2020. The bank has a interest at December 31, 2019, but did not continue to accrue interest for 2020 impairment of the loan. The projected cash flows are: Date of cash flow December31, 2021 December31, 2022 Amount projected as of Dec. 31, 2020 500,000 1,000,000

Problem 25 Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the payment in full on January 1, 2023, plus annual interest payment at 12%. The intere was made as scheduled on January 1, 2019. However, due to financial setbacks, the was unable to make its 2020 interest payment and Davao Bank considers the loan im projects the cash flows from the loan as of December 31, 2020. The bank has a interest at December 31, 2019, but did not continue to accrue interest for 2020 impairment of the loan. The projected cash flows are: Date of cash flow December31, 2021 December31, 2022 Amount projected as of Dec. 31, 2020 500,000 1,000,000

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 4P: Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual...
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Problem 25 Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the loan were payment in full on January 1, 2023, plus annual interest payment at 12%. The interest payment was made as scheduled on January 1, 2019. However, due to financial setbacks, the borrower was unable to make its 2020 interest payment and Davao Bank considers the loan impaired and projects the cash flows from the loan as of December 31, 2020. The bank has accrued the interest at December 31, 2019, but did not continue to accrue interest for 2020 due to the impairment of the loan. The projected cash flows are: Amount projected as of Dec. 31, 2020 500,000 1,000,000 2,000,000 4,000,000 Date of cash flow December31, 2021 December31, 2022 December31, 2023 December31, 2024 The present value at 12% is as follows: For one period 0.89 For two periods For three periods For four periods 0.80 0.71 0.64 Required: 1.Compute the impairment loss of the loan receivable on December 31,2020. 2.Prepare a table of amortization for the loan receivable. 3. Prepare journal entries for 2018 – 2024.
Transcribed Image Text:Problem 25 Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the loan were payment in full on January 1, 2023, plus annual interest payment at 12%. The interest payment was made as scheduled on January 1, 2019. However, due to financial setbacks, the borrower was unable to make its 2020 interest payment and Davao Bank considers the loan impaired and projects the cash flows from the loan as of December 31, 2020. The bank has accrued the interest at December 31, 2019, but did not continue to accrue interest for 2020 due to the impairment of the loan. The projected cash flows are: Amount projected as of Dec. 31, 2020 500,000 1,000,000 2,000,000 4,000,000 Date of cash flow December31, 2021 December31, 2022 December31, 2023 December31, 2024 The present value at 12% is as follows: For one period 0.89 For two periods For three periods For four periods 0.80 0.71 0.64 Required: 1.Compute the impairment loss of the loan receivable on December 31,2020. 2.Prepare a table of amortization for the loan receivable. 3. Prepare journal entries for 2018 – 2024.
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