DuraBond borrowed $1,300,000 from Ellis Bank and Trust in 20X1 to finance the purchase of a commercial building in lower Manhattan. At the time of the purchase the building was appraised at $1,543,000. Ellis Bank entered into a 20 year mortgage at the 20x1 market rate of interest, 6.5% with DuraBond. In 20X7, the real estate market fell on difficult times, 6 tenants renting DuraBonds building closed their businesses causing DuraBond to have difficulty making the mortgage payments. DuraBond proposed restructuring the loan based on the current value of the building. At the time of the proposal, the mortgage balance was $948,000. An appraisal noted the buildings value declined approximately 60% of the original market value when DuraBond acquired the building. Ellis accepted DuraBonds restructuring proposal to adjust the loan to current fair value of the property, if DuraBond continued to make regularly monthly payments.

Compute the impairment value that Ellis Bank should record on the investment due to the loan modification.

• A.

  $925,800

• B.

  $0

• C.

  $330,800

• D.

  $617,200