Question
Items 10 to 12 are based on the following information: Solid Bank loaned P5,000,000 to a borrower on January 1, 2018. The terms of the
Items 10 to 12 are based on the following information:
Solid Bank loaned P5,000,000 to a borrower on January 1, 2018. The terms of the loan require principal payments of P 1,000,000 each year for 5 years plus interest at 8%.
The first principal and interest payment is due on January 1, 2019. The borrower made the required payments during 2019 and 2020.
However, during 2020 the borrower began to experience financial difficulties, requiring the bank to reassess the collectibility of the loan.
On December 31, 2020, the bank has determined that the remaining principal payment will be collected as originally scheduled but the collection of the interest is unlikely.
The bank did not accrue the interest on December 31, 2020.
Present value of 1 at 8%
For one period0.926
For two periods 0.857
For three periods 0.794
10. What is the impairment loss for 2020?
11. What is the interest income for 2021?
12. What is the carrying amount of the loan receivable on December 31, 2021?
Items 13 to 15 are based on the following information:
On December 1, 2020, Solvent Company assigned specific accounts receivable totaling P5,000,000 as collateral on a P4,000,000 12% note from a certain bank. The entity will continue to collect the assigned accounts receivable.
In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the assigned accounts.
The December collections of assigned accounts receivable amounted to P 2,000,000 less cash discount of P200,000.
On December 31, 2020, the entity remitted the collections to the bank in payment for the interest accrued on December 31, 2020 and the note payable.
The entity accepted sales returns of P 100,000 on the assigned accounts and wrote off assigned accounts 'of P300,000.
13. What amount of cash was received from the assignment of accounts receivable onDecember 1, 2020?
14. What is the carrying amount of note payable on December 31, 2020?
15. What amount should be disclosed as the equity of Solvent Company in assignedaccounts on December 31, 2020?
Items 16 to 18 are based on the following information:
Foremost Company received from a customer a one-year, P500,000 note bearing annual interest of 8%.
Alter holding the note for six months, the entity discounted the note at the bank at an effective interest rate of 10%.
16. What amount of cash was received from the bank?
17. What is the loss on note receivable discounting?
18. On July 1, 2020, Jolly Company sold goods in exchange for P2,000,000, 8-rnonth,noninterest- bearing note receivable.
At the time of the sale, the note's market rate of interest, was 12%. The note wasdiscounted at 10% on September 1, 2020.
What amount was received from the note receivable discounting?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started