What is the amount of the loss on impairment

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On December 31, 2004, Packard signed a $1,600,000, 7-year note to Beehive Bank. The market rate of interest at that time was 12%. The stated interest rate on the note was 9%, payable semi-annually, on June 30 and December 31. Unfortunately, because of his excessive lifestyle and the amount of money he spent for the October 2005 Pridefest to impress his friends, Packard's financial condition worsened. As of June 30, 2006, Beehive determined that Packard would pay back only $600,000 at maturity and would pay interest based on the $600,000. Beehive uses the loan's historical effective rate to measure loan impairments. What is the amount of the loss on impairment that Beehive should recognize at June 30, 2006?

Reference no: EM13124924

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