Reference no: EM133150198
Question - On December 31, 2020, Pharoah Company signed a $1,152,800 note to Novak Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Pharoah's financial situation worsened. On December 31, 2022, Novak Bank determined that it was probable that the company would pay back only $691,680 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,152,800 loan.
Required -
Determine the amount of cash Pharoah received from the loan on December 31, 2020.
Create a note amortization schedule for Novak Bank up to December 31, 2022.
Determine the loss on impairment that Novak Bank should recognize on December 31, 2022.
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