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Auditing and Assurance CASE 1: ELIZALDE COMPANY On January 1, 201A, Elizalde Company loaned P3,000,000 to Buenaventura Company. The terms of the loan were payment

Auditing and Assurance

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CASE 1: ELIZALDE COMPANY On January 1, 201A, Elizalde Company loaned P3,000,000 to Buenaventura Company. The terms of the loan were payment in full on January 1, 201F, plus annual interest payments at 11%. The interest payment was made as scheduled on January 1, 201B; however, due to financial setbacks, Buenaventura was unable to make its 201C interest payment. Elizalde considers the loan impaired and projects the following cash flows from the loan as of December 31, 201C and 201D. Assume that Elizalde accrued the interest at December 31, 201B, but did not continue to accrue interest due to the impairment of the loan. Amount projected as of Date of Flow Dec. 31, 201C Dec. 31, 201D December 31, 201D P 200,000 P 200,000 December 31, 201E 400,000 600,000 December 31, 201F 800,000 1,200,000 December 31, 201G 1,200,000 1,000,000 December 31, 201H 400,000 Required: Your client requested you to determine the following: (Round-off present value factors to four decimal places) 1. Loan impairment (bad debt expense) for the year 201C. 2. Interest income for 201D assuming the P200,000 was collected on December 31, 201D as scheduled. 3. Allowance for loan impairment as of December 31, 201D. 4. Interest income for 201E assuming the P600,000 was collected on December 31, 201E as scheduled. 5. Carrying amount of loan receivable as of December 31, 201E

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