Question
Awesome Bank granted a loan to a borrower on January 1, 2021. The interest rate on the loan is 10% payable annually starting December 31,
Awesome Bank granted a loan to a borrower on January 1, 2021. The interest rate on the loan is 10% payable annually starting December 31, 2021. The loan matures in five years on December 31, 2025.
Principal amount 4,000,000
Direct origination cost 61,500
Origination fee received from the borrower 350,000
The effective rate on the loan after considering the direct origination cost and origination fee received is 12%.
Required:
1. Compute the carrying amount of the loan receivable on January 1, 2021.
2. Prepare a table of amortization for the loan receivable.
3. Prepare the journal entries for 2021 and 2022.
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