Problem 8-2

2012
Jan. 1 Loan receivable 4,000,000.00
Cash 4,000,000.00

Cash 342,100.00
Unearned interest income 342,100.00

Unearned interest income 150,000.00

Cash 150,000.00

Dec. 31 Cash 400,000.00

Interest income 400,000.00

Unearned interest income 56,948.00

Interest income 56,948.00

(10%) (12%)
Date Interest received Interest income Amortization Carrying value
01/01/2012 3,807,900.00
12/31/2012 400,000.00 456,948.00 56,948.00 3,864,848.00
12/31/2013 400,000.00 463,782.00 63,782.00 3,928,630.00
12/31/2014 400,000.00 471,370* 71,370.00 4,000,000.00

*12% x 3,928,630 equals 471,435, or a difference of P65 due to rounding

2013
Dec. 31 Cash 400,000.00
Interest income 400,000.00

Unearned interest income 63,782.00

Interest income 63,782.00

2014
Dec. 31 Cash 400,000.00
Interest income 400,000.00

Unearned interest income 71,370.00

Interest income 71,370.00

2014
Dec. 31 Cash 4,000,000.00
Loan receivable 4,000,000.00
Carrying value
3,807,900.00
3,864,848.00
3,928,630.00
4,000,000.00
Problem 8-3

2012
Jan. 1 Loan receivable 3,000,000.00
Cash 3,000,000.00

Direct origination cost 260,300.00

Cash 2,603,000.00

Cash 100,000.00
Direct origination cost 100,000.00

Dec. 31 Cash 240,000.00

Interest income 240,000.00

Interest income 50,382.00

Direct origination cost 50,382.00

(8%) (6%)
Date Interest received Interest income Amortization
01/01/2012
12/31/2012 240,000.00 189,618.00 50,382.00
12/31/2013 240,000.00 186,595.00 53,405.00
12/31/2014 240,000.00 183,487.00 56,513.00

2013
Dec. 31 Cash 240,000.00
Interest income 240,000.00

Interest income 53,405.00

Direct origination cost 53,405.00

2014
Dec. 31 Cash 240,000.00
Interest income 240,000.00

Interest income 56,513.00

Direct origination cost 56,513.00

Cash 3,000,000.00
Loan receivable 3,000,000.00
Carrying value
3,160,300.00
3,109,918.00
3,056,513.00
3,000,000.00
VALIX 8-4
#1
December 31, 2014 (1M x .93) 930,000
December 31, 2015 (2M x .86) 1,720,000
December 31, 2016 (3M x .79) 2,370,000
Total present value of the loan 5,020,000

Loan receivable - 12/31/2013 6,000,000

Accrued interest (6M x 8%) 480,000
Total carrying value 6,480,000
Present value of the loan 5,020,000
Impairment loss 1,460,000

#2
2013 Impairment loss 1,460,000
Accrued interest receivable 480,000
Allowance for loan impairment 980,000

2014 Cash 1,000,000

Loan receivable 1,000,000

Allowance for loan impairment 401,600

Interest income (8% x 5.02M) 401,600

2015 Cash 2,000,000

Loan receivable 2,000,000

Allowance for loan impairment 353,728

Interest income 353,728

Loan receivable - 12/31/2014

Allowance for loan impairment (980,000 - 401,600)
Carrying amount - 12/31/2014

Interest income for 2015 (8% x 4,421,600)

2016 Cash 3,000,000

Loan receivable 3,000,000

Allowance for loan impairment 224,672

Interest income 224,672

Loan receivable - 12/31/2014

Allowance for loan impairment (578,400 - 353,672)
Carrying amount - 12/31/2014

Interest income for 2016 (8% x 2,775,328) 222,026

Allowance per book 224,672
Difference due to rounding off (2,646)
5,000,000
(578,400)
4,421,600

353,728

3,000,000
(224,672)
2,775,328
VALIX 8-5
#1
December 31, 2014 (.5M x .89) 445,000.00
December 31, 2015 (1M x .80) 800,000.00
December 31, 2016 (2M x .71) 1,420,000.00
December 31, 2017 (4M x .64) 2,560,000.00
Total present value of the loan 5,225,000.00

#2
Loan receivable 7,500,000.00
Accrued interest (7.5M x 12%) 900,000.00
Total carrying value 8,400,000.00
Present value of the loan 5,225,000.00
Impairment loss 3,175,000.00

#3
2013 Impairment loss 3,175,000.00
Accrued interest receivable 900,000.00
Allowance for loan impairment 2,275,000.00

2014 Cash 500,000.00

Loan receivable 500,000.00

Allowance for loan impairment 627,000.00

Interest income 627,000.00
(5.225M x 12%)

2015 Cash 1,000,000.00

Loan receivable 1,000,000.00

Allowance for loan impairment 642,240.00

Interest income 642,240.00

Loan receivable - 12/31/2013

Allowance for loan impairment (2,275,000 - 627,000)
Carrying amount - 12/31/2013

Interest income for 2014 (12% x 5,352,600)

7,000,000.00
(1,648,000.00)
5,352,000.00

642,240.00
Problem 8-6

Requirements #1:
December 31, 2016 (360,000 x .772) 277,920.00
December 31, 2017 (360,000 x .708) 254,880.00
December 31, 2018 (360,000 x .650) 234,000.00
December 31, 2019 (4,360,000 x .596) 2,598,560.00
Total present value of loan 3,365,360.00

Requirements #12:
Face value of loan 4,000,000.00
Present value of loan 3,365,360.00
Impairment loss 634,640.00

2013 Cash 360,000.00

Interest income 360,000.00

Impairment loss 634,640.00

Allowance for loan impairments 634,640.00

2014 Allowance for loan impairment 302,882.00

Interest income (9% x 3,365,360) 302,882.00

2015 Allowance for loan impairment 331,758.00

Interest income (634,640 - 302,882) 331,758.00

2016 Cash 360,000.00

Interest income 360,000.00

2017 Cash 360,000.00

Interest income 360,000.00

2018 Cash 360,000.00

Interest income 360,000.00

2019 Cash 4,360,000.00

Interest income 360,000.00
Loan receivable 4,000,000.00