Reference no: EM132815754
Problem 1 - ABC Bank granted a loan to a borrower on January 01, 2016. The interest on the loan is 8% payable annually starting December 31, 2016. The loan matures in three years on December 31, 2018.
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Principal amount
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5,000,000
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Direct origination cost incurred
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100,000
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Indirect origination cost incurred
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50,000
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Origination fee charged against the borrower
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340,000
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Required -
1. What is the carrying amount of the loan receivable on January 1, 2016?
2. What is the interest income for 2016?
3. What is the carrying amount of the loan receivable on December 31, 2016?
Problem 2 - ABC Bank loaned P9,000,000 to a borrower on January 01, 2014. The terms of the loan were payment in full on January 01, 2019, plus annual interest payment at 11%. The interest payment was made on scheduled on January 01, 2015. However, due to financial setbacks, the borrower was unable to make the 2016 interest payment the 2016 interest payment. The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2016. The bank has accrued the interest on December 31, 2015, but did not continue to accrue interest for 2016 due to the impairment of the loan. The projected cash flows are:
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Date of cash flow
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Amount projected on December 31, 2016
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December 31, 2017
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1,500,000
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December 31, 2018
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2,000,000
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December 31, 2019
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2,500,000
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December 31, 2020
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3,000,000
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Required -
1. What is the loan impairment loss for 2016?
2. What is the interest income for 2017?
3. What is the carrying amount of the loan receivable on December 31, 2017?
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