On January 1, 2019, Makakaya Co. granted a five year loan to a borrower amounting to P6,000,000. The loan bears interest of 12% and to be collected every December 31. The loan was initially recognized at P6,455,000 and the effective interest rate of this loan was 10%.On December 31, 2020, Makakaya Co. considers the loan impaired and that only P5,000,000 principal amount will be collected. No cash flows received in 2020 and the company did not accrue the interest because of the impairment. The prevailing rate of interest for a loan of this type is 14%.On December 31, 2021, the financial condition of the borrower has improved and that it can pay its entire unpaid obligation, including principal and interest at maturity. Compute for the loan impairment on December 31, 2020. *

On January 1, 2019, Makakaya Co. granted a five year loan to a borrower amounting to P6,000,000. The loan bears interest of 12% and to be collected every December 31. The loan was initially recognized at P6,455,000 and the effective interest rate of this loan was 10%.On December 31, 2020, Makakaya Co. considers the loan impaired and that only P5,000,000 principal amount will be collected. No cash flows received in 2020 and the company did not accrue the interest because of the impairment. The prevailing rate of interest for a loan of this type is 14%.On December 31, 2021, the financial condition of the borrower has improved and that it can pay its entire unpaid obligation, including principal and interest at maturity. Compute for the loan impairment on December 31, 2020. *

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 61P

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