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Two Bank of Cincinnati is a local community bank. The credit department estimates the impairment loss of loan receivables by using statement of financial position
Two Bank of Cincinnati is a local community bank. The credit department estimates the impairment loss of loan receivables by using statement of financial position approach. On 31 December 2021, an agingschedule of loans receivable was produced under the following five groups: Days loan Outstanding Amount ($'000) Est.% of Uncollectible Current 250,000 1% 1 - 30 days past due 50,000 2% 31 - 60 days past due 30,000 5% 61 - 90 days past due 10,000 10% > 90 days past due 2.000 342,000 50% End of November balance of Allowance of Impairment account was $2,000,000 Cr. Required: (a) Compute the estimated amount of uncollectible loan accounts. (3 marks) (b) Prepare adjusting journal entry at the year-end to record the estimated impairment loss on loan receivables. (2 marks) (c) On 7 March 2022, a past due loan of $380,000 which had been written off in December 2021, was received in full. Prepare the journal entries to record the recovery of loan receivable (4 marks) (Total 9 marks)
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