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7. On January 1, 2021, Arezzo Company received a 10%, P14,000,000, note collectible in installment plus interest every December 31 of each year until December 31, 2025. The note is collectible in principal as follows:

December 31, 2021

P4,000,000

December 31, 2022

3,500,000

December 31, 2023

3,000,000

December 31, 2024

2,500,000

December 31, 2025

1,000,000

The interest effective on January 1, 2021 is at 14%, on December 31, 2021 is at 15%.

Question 1: How much is the initial present value of the note receivable when received on January 1, 2021?

a. P12,921,826

b. P12,098,192

c. P11,326,352

d. P10,226,392

Question 2: How much is the carrying value of the note on December 31, 2021?

a. P13,330,882

b. P11,512,041

c. P9,330,882

d. P8,391,939

Question 3: How much of the carrying value of the note receivable is reported as non-current as of December 31, 2022?

a. P6,137,206

b. P3,346,414

c. P6,002,891

d. P3,129,324

8. On October 31, 2021, Hagrid Corp. engaged the following transactions:

Obtained a P500,000, 6-month loan from Citibank, discounted at 12%. The company pledge P600,000 of the accounts receivable as a security for the loan.

Factored P1,000,000 of accounts receivable without recourse on a notification basis with Nahum Finance Company. Nahum Finance charged a factoring fee of 5% of the amount of receivable factored and withheld 10% of the receivable factored.

What is the total cash received from the financing of receivables and the amount of loss, respectively?

a. P1,320,000 and P50,000

b. P1,320,000 and P150,000

c. P1,420,000 and P50,000

d. P1,420,000 and P150,000

9. On April 1, 2021, Lunar Company loaned P20,000,000 to Eclipse Company. The loan is to repayable after 5 years. Interest on this loan is 3% annually every April 1 of each year starting 2022. Direct origination cost of P478,991 was paid by Lunar and direct origination fee was deducted to the proceeds received by Eclipse Company. The interest effective on this loan is 5% after the origination costs and fees.

Question 1: How much is the direct origination fee?

a. P2,178,271

b. P2,008,899

c. P2,210,782

d. P2,190,792

Question 2: How much is the interest income recognized in its 2022 income statement?

a. P925,163

b. P913,410

c. P929,081

d. P941,442

Question 3: What is the carrying value of the loan on December 31, 2022?

a. P18,581,620

b. P18,828,431

c. P18,910,701

d. P19,169,852

10. Details for one of the loans of Cebuano Company that is probably impaired during the period is as follows:

a. The company made a loan of P40,000,000 to a customer with similar credit risk to Cebuano Company on January 1, 2021.

b. Interest is receivable on this loan at the end of each year at 2% per annum for the next five years.

c. The loan was properly recorded and classified as amortized cost.

d. The company made and initial assessment of the loan and the total expected credit losses over the life of the loan was P1,000,000. The discount rate applicable was at 2%.

e. On January 1, 2021, the probability of default over the next 12 months was 5%.

At December 31, 2021, there was a significant increase in the credit risk on the loan made by Cebuano Company, the expert assessed that the total expected credit losses over the life of the loan was increase to P2,200,000. The discount rate applicable was at 2%.

Question 1: How much is the total impairment loss recognized by Cebuano Company in its Statement of Comprehensive income for period ending December 31, 2021?

a. P1,947,321 b. P1,946,416 c. P1,987,173 d. P1,986,268

Question 2: How much is the balance of the allowance for credit losses as of December 31, 2021?

a. P2,032,460 b. P1,992,608 c. P2,011,835 d. P1,987,927