Topic: Loan Receivable

Problem 7-10 (LAA) Solid Bank loaned P5,000,000 to a borrower on January 1, 2018 The terms of the loan require principal payments of P1,000,000 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 period 0.926 For two periods 0.857 For three periods 0.7941. Complete the amortization table for the original loan agreement. Assume that any rounding off difference will be settled in the year of maturity. (10 points) Date Collections Interest Earned Carrying Amount Interest Principal Acc. Int. Inc Loan Rec. Total Rec. Jan. 1, 2018 Dec. 31, 2018 Jan. 1, 2019 Dec. 31, 2019 Jan. 1, 2020 Dec. 31, 2020 Jan. 1, 2021 Dec. 31, 2021 Jan. 1, 2022 Dec. 31, 2022 Jan 1 2023