Scribd Logo
Upload

Welcome to Scribd!

  • 92 views

    3 - Accounting For Loans and Impairment

    Uploaded by

    Reese Ayessa
    This document contains three problems related to accounting for loans. Problem 1 provides details of loans made by Mabuhay Company and Sana All Incorporated, with questions regarding initial amortized cost, interest income recognized, and carrying values. Problem 2 gives details of a loan from Azure Company to Black Company, with questions about origination fees, amortized cost, interest income, and carrying values. Problem 3 describes an impaired loan of Contour Company, providing loan details and questions about initial amortized cost, impairment losses, interest income, and loan receivable amounts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    3 - Accounting For Loans and Impairment

    Uploaded by

    Reese Ayessa
    92 views1 page
    This document contains three problems related to accounting for loans. Problem 1 provides details of loans made by Mabuhay Company and Sana All Incorporated, with questions regarding initial amortized cost, interest income recognized, and carrying values. Problem 2 gives details of a loan from Azure Company to Black Company, with questions about origination fees, amortized cost, interest income, and carrying values. Problem 3 describes an impaired loan of Contour Company, providing loan details and questions about initial amortized cost, impairment losses, interest income, and loan receivable amounts.

    Original Title

    3_Accounting for Loans and Impairment

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document contains three problems related to accounting for loans. Problem 1 provides details of loans made by Mabuhay Company and Sana All Incorporated, with questions regarding initial amortized cost, interest income recognized, and carrying values. Problem 2 gives details of a loan from Azure Company to Black Company, with questions about origination fees, amortized cost, interest income, and carrying values. Problem 3 describes an impaired loan of Contour Company, providing loan details and questions about initial amortized cost, impairment losses, interest income, and loan receivable amounts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    92 views1 page

    3 - Accounting For Loans and Impairment

    Uploaded by

    Reese Ayessa
    This document contains three problems related to accounting for loans. Problem 1 provides details of loans made by Mabuhay Company and Sana All Incorporated, with questions regarding initial amortized cost, interest income recognized, and carrying values. Problem 2 gives details of a loan from Azure Company to Black Company, with questions about origination fees, amortized cost, interest income, and carrying values. Problem 3 describes an impaired loan of Contour Company, providing loan details and questions about initial amortized cost, impairment losses, interest income, and loan receivable amounts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Centro Escolar University

    Manila, Malolos and Makati Campus


    Accounting for Loans

    Problem 1
    On January 1, 2021, Mabuhay Company loaned P3,000,000 to Sana All Incorporated at 10% annual
    interest. The loan is due after four (4) years. Mabuhay Company incurred direct origination cost of
    P120,000 and Sana All paid direct origination fee of P213,273. Interest effective after considering direct
    cost and fees is at 11%.

    1. What is the initial amortized cost of the Loan on January 1, 2021? 2,906,727
    2. How much is the interest income recognized in its 2021 income statement? 319,740
    3. What is the carrying value of the loan on December 31, 2021? 2,926,467
    4. What is the carrying value of the loan on December 31, 2022? 2,948,378

    Problem 2
    On February 1, 2021, Azure Company loaned P10,000,000 to Black Company. The loan is to repayable
    after 2 years. Interest on this loan is 2% annually and a direct origination cost of 1% of the total loaned
    amount is paid by Azure and direct origination fee was deducted to the proceeds received by Black
    Company. The interest effective on this loan is 3.5%.

    1. How much is the direct origination fee? 384,954


    2. What is the initial amortized cost of the loans? 9,715,046
    3. How much is the interest income recognized in its 2021 income statement? 340,027
    4. What is the carrying value of the loan on December 31, 2021? 9,855,073
    5. What is the carrying value of the loan on December 31, 2022? 0

    Problem 3
    Details for one of the loan of Contour Company that is probably impaired during the period is as follows:
    a. The company made a loan of P100,000,000 to a customer with similar credit risk to Contour
    Company on January 1, 2020.
    b. Interest is receivable on this loan at the end of each year at 4.5% per annum for the next ten
    years.
    c. The loan was properly recorded and classified as amortized cost.
    d. The company made and initial assessment of the loan and the total expected credit losses over
    the life of the loan was P15,000,000. The discount rate applicable was at 3%.
    e. On January 1, 2020, the probability of default over the next 12 months was 10%.

    On December 31, 2020, there was no indication of impairment nor increase in credit risk. At December
    31, 2021, there was a significant increase in the credit risk on the loan made by Contour Company, the
    expert assessed that the total expected credit losses over the life of the loan was increase to
    P30,000,000. The discount rate applicable was at 3%.

    On December 31, 2022, it became clear that the customer was in serious financial difficulties and the
    directors of Contour believed that there was an objective evidence of impairment. The total expected
    credit losses over the life of the loan was on this date was at P50,000,000. The discount rate applicable
    was at 3%.

    1. What is the initial amortized cost of the loans on January 1, 2020? 98,883,859
    2. What is the amount of impairment loss shall Contour recognized on January 1, 2020?
    3. How much is the interest income reported in 2020 Statement of comprehensive income?
    4. What is the amount of loan receivable is presented in 2020 statement of financial position?
    5. What amount of impairment loss shall Contour recognized on December 31, 2021?
    6. How much is the interest income reported in 2020 Statement of comprehensive income?
    7. What is the amount of loan receivable is presented in 2020 statement of financial position?

    *** end of Handout ***

    1. P98,883,859
    2. P1,116,141
    3. P4,500,000
    4. P98,850,375
    5. P22,498,163
    6. P4,500,000
    7. P76,317,723

    You might also like