On January 1, 2016, Kinakaya Pa Company granted a five-year loan to a borrower amounting to P5,000,000. The loan bears interest of 10% and is collectible every December 31.

On December 31, 2017, Kinakaya Pa Company considers the loan impaired and that only P4,000,000 principal amount will be collected. No cash was received in 2017. The prevailing rate of interest for a loan of this type is 12%.

Assuming the following independent cases:

Case No. 1: Kinakaya Pa Company accrued the interest on December 31, 2017 and the entire P4,000,000 will be collected on the maturity date.

Case No. 2: Kinakaya Pa Company did not accrue the interest on December 31, 2017 and the entire P4,000,000 will be collected on the maturity date.

Case No. 3: Kinakaya Pa Company did not accrue the interest on December 31, 2017 and the P4,000,000 will be collectible as follows:

Date December 31, 2018 December 31, 2019

Amount 1,500,000 2,500,000

Case No. 4: Kinakaya Pa Company did not accrue the interest on December 31, 2017 and the P4,000,000 will be collectible as follows:

Required:

Date January 1, 2018

December 31, 2018 December 31, 2019

Amount 1,000,000 2,000,000 1,000,000

A. Compute for the following:

1) Loan impairment loss in 2017

2) Interest Income in 2018

3) Carrying amount of the loan, December 31, 2018.

B. Prepare the necessary entries from the date of impairment to 2018.