Question
On December 31, 2017, Cheyenne Company signed a $1,054,800note to Ayayai Bank. The market interest rate at that time was11%. The stated interest rate on
On December 31, 2017, Cheyenne Company signed a $1,054,800note to Ayayai Bank. The market interest rate at that time was11%. The stated interest rate on the note was9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Cheyenne's financial situation worsened. On December 31, 2019, Ayayai Bank determined that it was probable that the company would pay back only $632,880of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,054,800loan.
Determine the loss on impairment that Ayayai Bank should recognize on December 31, 2019.
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