Reference no: EM132819286
Question - SoldBank loaned P 5,000,000 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 are 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 he collection of the interest is unlikely. The bank did not accrue the interest on December 31, 2020.
Present value of P1 at 8%
For one period - 0.926; two periods - 0.857; three periods - 0.794
1. What is the impairment loss for 2020?
2. What is the interest income for 2021?
3. What is the carrying amount of the receivable on December 31, 2021?
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