On January 2, 2022 , Maya Finance Company lent P1,000,000 to James Trading. James Trading agreed to repay the loan to Maya Finance after six years, with interest at 8% payable every year end, starting on December 31, 2022. Based on the credit information obtained by Maya Finance for James Trading as of December 31, 2022, the probability of default for the next 12 months is 4% and Maya expected to collect only 95% of the principal loan. 

 

Required:

1. How much impairment loss should Maya Finance Company recognize on the loans receivable from James Trading in its 2022 proft or loss?
2. How much amortized cost should Maya Finance reports in its December 31, 2022 statement of financial position at December 31, 2022, relating to this loan? 

 

After collecting the interest of December 31, 2023, the probability of default over the remaining four years of the loan increased to 10% and the expected recovery of the principal loan is reduced to only 75%. However, there is no objected evidence of receivable impairment at this time. 

 

Required:

1. How much impairment loss should Maya Finance Company recognize on the loan receivable from James Trading in its 2023 profit or loss?
2. How much amortized cost should Maya Finance Company report in its December 31, 2022 statement of financial position relating to this loan?