LYKA MAE L.

TERO
BSA-1

ASSIGNMENT:
CHAPTER 6

PROBLEM 6-8 ANSWER A

Savage Company

First payment on January 1, 2019 600,000

Present value of remaining six payments (600,000 x 4.36) 2,616,000
Correct sales revenue 3,216,000

PROBLEM 6-10
Jovial Company

Question 1 ANSWER A

NR from Zeta 1,000,000

Question 2 ANSWER B

NR from Yola (1,150,000 x .68) 782,000

PROBLEM 6-12

Precious Company

Question 1: Answer: D. 2,825,000

Present Value of NV (500,000 x 5.650) 2,825,000

Question 2: Answer: C. 825,000

N/R- Dec. 31,2019 (2,825,000 – 2,000,000) 825,000

Question 3: Answer: B. 339,000

 Gain on Sale of Equipment (825,000 – 486,000) 339,000
Question 4: Answer: D. 2,664,000

N/R- Dec. 31, 2019 (2,825,000 – 500,000) 2,325,000

Unearned Interest Income -Dec. 31, 2019 339,000
Carrying Amount- Dec. 31, 2020 2,664,000

PROBLEM 6-14
Akin Company

1. Answer: C. 450,000

Note Receivable 6,000,000

Present Value of N/R (6,000,000 x .75) 4,500,000
Unearned Interest Income 1,500,000

Interest Income
2019 (10% x 4,500,000) 450,000
2020 (10% x 4,950,000) 495,000
2021 (1,500,000- 450,000- 495,000) 555,000
Total 1,500,000

2. Answer: D. 300,000 loss

Present Value of Note Receivable 4,500,000

Carrying amount of equipment 4,800,000
Loss on sale of equipment ( 300,000)

CHAPTER 7

PROBLEM 7-5
Solvent Bank

Requirement 1

December 31, 2020 (1,000,000 x .93) 930,000

December 31, 2021 (2,000,000 x .86) 1,720,000
December 31, 2022 (3,000,000 x .79) 2,370,000
Total present value of loan 5,020,000

Loan Receivable – 12/31/2019 6,000,000

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

Requirement 2

2019 Impairment loss 1,460,000

Accrued interest receivable 480,000
Allowance for loan impairment 980,000

2020 Cash 1,000,000

Loan receivable 1,000,000

Allowance for loan impairment 401,600

Interest income (8% x 5,020,000) 401,600

2021 Cash 2,000,000

Loan receivable 2,000,000

Allowance for loan impairment 353,728

Interest Income 353,728

Loan Receivable -12/31/2020 5,000,000

Allowance for loan impairment (980,000 – 401,600) ( 578,400 )
Carrying amount- 12/31/2020 4,421,600

Interest income for 2021 (8%x 4,421,600) 353,728

2022 Cash 3,000,000

Loan receivable 3,000,000

Allowance for loan impairment 224,672

Interest Income 224,672

Loan Receivable -12/31/2021 3,000,000

Allowance for loan impairment (578,400 – 353,672) ( 224,672)
Carrying amount- 12/31/2021 2,775,328

Interest income for 2022 (8% x 2,775,328) 222,026

Allowance per book 224,672
Difference due to rounding 2,646

PROBLEM 7-6
Cozy Bank
Requirement 1

December 31, 2020 (500,000 x .89) 445,000

December 31, 2021 (1,000,000 x .80) 800,000
December 31, 2022 (2,000,000 x .71) 1,420,000
December 31, 2023 (4,000,000 x .64) 2,560,000
Total present value of loan 5,225,000

Requirement 2

Loan receivable 7,500,000

Accrued interest receivable (12% x 7,500,000) 900,000
Total carrying amount 8,400,000
Present value of loan 5,225,000
Impairment loss 3,175,000

Requirement 3

2019 Impairment loss 3,175,000

Accrued interest receivable 900,000
Allowance for loan impairment 2,275,000

2020 Cash 500,000

Loan receivable 500,000

Allowance for loan impairment 627,000

Interest income (12% x 5,225,000) 627,000

2021 Cash 1,000,000

Loan receivable 1,000,000
 Allowance for loan impairment 642,240
Interest income 642,240

Loan receivable – 12/31/2020 7,000,000

Allowance for loan impairment (2,275,000 - 627,000) (1,648,000)
Carrying amount – 12/31/2020 5,352,000

Interest income for 2021 (12% x 5,352,000) 642,240

PROBLEM 7-10
Solid Bank

Question 1 ANSWER B

January 1, 2020 collection 1,000,000

January 1, 2021 collection (1,000,000 x .926) 926,000
January 1, 2022 collection (1,000,000 x .857) 857,000
Total present value of loan 2,783,000

Loan receivable 3,000,000

Present value of loan 2,783,000
Impairment loss 217,000

Question 2 ANSWER B

Loan receivable 3,000,000

Collection on January 1, 2020 (1,000,000)
Loan receivable - January 1, 2020 2,000,000
Allowance for loan impairment ( 217,000)
Carrying amount - January 1, 2020 1,783,000

Interest income for 2020 (1,783,000 x 8%) 142,640

Question 3 ANSWER B

Loan receivable - 12/31/2020 2,000,000

Allowance for loan impairment - 12/31/2020 (217,000 - 142,640) ( 74,360)
Carrying amount - 12/31/2020 1,925,640
PROBLEM 7-12
Oblation Bank

Question 1 ANSWER A

PV of principal (5,000,000 x .75) 3,750,000

PV of interest (200,000 x 2,49) 498,000
Total present value 4,248,000
Carrying amount 5,000,000
Impairment loss 752,000

Impairment loss 752,000

Allowance for impairment 752,000

Question 2 ANSWER B

Interest income for 2020 (10% x 4,248,000) 424,800

Interest received (4% x 5,000,000) 200,000
Amortization of allowance for impairment 224,800

Cash 200,000
Allowance for impairment 224,800
Interest income 424,800

Question 3 ANSWER C

Loan receivable - 12/31/2020 5,000,000

Allowance for impairment (752,000 - 224,800) ( 527,200)
Carrying amount - 12/31/2020 4,472,800