Lugia Bank granted a P4,000,000 loan to Ho-oh Company on January 1, 2020. The annual interest of the loan is 12% payable semi-annually. The loan matures in two years. The effective interest rate on the loan is 16%. (Round off present value factors up to four decimal point; only round off up to two decimals the final value) Questions: 1. What is the initial carrying amount of the loan? 2. How much is the interest income for the year 2020? 3, What is the balance of the discount on the loan as of December 31, 2020?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
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Lugia Bank granted a P4,000,000 loan to Ho-oh Company on January 1, 2020. The annual interest of the loan
is 12% payable semi-annually. The loan matures in two years. The effective interest rate on the loan is 16%.
(Round off present value factors up to four decimal point; only round off up to two decimals the final value)
Questions:
1. What is the initial carrying amount of the loan?
2. How much is the interest income for the year 2020?
3, What is the balance of the discount on the loan as of December 31, 2020?
Transcribed Image Text:Lugia Bank granted a P4,000,000 loan to Ho-oh Company on January 1, 2020. The annual interest of the loan is 12% payable semi-annually. The loan matures in two years. The effective interest rate on the loan is 16%. (Round off present value factors up to four decimal point; only round off up to two decimals the final value) Questions: 1. What is the initial carrying amount of the loan? 2. How much is the interest income for the year 2020? 3, What is the balance of the discount on the loan as of December 31, 2020?
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