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  • Loan impairment calculation and journal entries

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    Adam Cuenca
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    1) The document shows accounting entries for loans receivable over multiple years, including the principal amount, costs, interest income/receipts, and amortization for the initial loan. 2) It also includes present value calculations for future principal payments on loans receivable discounted at different rates each year, resulting in a total present value and impairment loss. 3) The document outlines subsequent years' interest income, projected cash flows from principal payments, and how the carrying value and impairment allowance are adjusted.

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    1) The document shows accounting entries for loans receivable over multiple years, including the principal amount, costs, interest income/receipts, and amortization for the initial loan. 2) It also includes present value calculations for future principal payments on loans receivable discounted at different rates each year, resulting in a total present value and impairment loss. 3) The document outlines subsequent years' interest income, projected cash flows from principal payments, and how the carrying value and impairment allowance are adjusted.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    24 views4 pages

    Loan impairment calculation and journal entries

    Uploaded by

    Adam Cuenca
    1) The document shows accounting entries for loans receivable over multiple years, including the principal amount, costs, interest income/receipts, and amortization for the initial loan. 2) It also includes present value calculations for future principal payments on loans receivable discounted at different rates each year, resulting in a total present value and impairment loss. 3) The document outlines subsequent years' interest income, projected cash flows from principal payments, and how the carrying value and impairment allowance are adjusted.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Principal amount 8,000,000

    Direct Original cost incurred 123,000


    Origination cost received from borrower (700,000)
    Carrying amount on Loan receivable - Jan 1, 2019 7,423,000

    Interest income (7,423,000 x 12%) 890,760


    Interest received (8,000,000 x 10%) (800,000)
    Amortization 90,760

    Beg. Loan receivable 5,000,000


    Principal payment (1,000,000 x 2) (2,000,000) Date
    Loan receivable - Jan/1/20 3,000,000 Dec/31/20
    Dec/31/21
    PV - 2021 (500,000 x 0.9091) 454,550 Dec/31/22
    PV - 2022 (1,000,000 x 0.8264) 826,400 Dec/31/23
    PV - 2023 (1,500,000 x 0.7513) 1,126,950 Dec/31/ 24
    Total PV of loan 2,407,900
    2018
    Loan receivable - Jan/1/2020 3,000,000
    Total PV of loan (2,407,900) 2019
    Impairment loss on L/R 592,100

    Loan Receivables 7,500,000 2020


    Accrued Interest Receivable (12% x 7,500,000) 900,000
    Total carrying amount 8,400,000

    PV - Dec/31/2021 (500,000 x 0.89) 445,000


    PV - Dec/31/2022 (1,000,000 x 0.80) 800,000 2021
    PV - Dec/31/2023 (2,000,000 x 0.71) 1,420,000
    PV - Dec/31/2024 (4,000,000 x 0.64) 2,560,000
    Total PV of loan 5,225,000

    Carrying amount 8,400,000 2022


    Total PV of loan (5,225,000)
    Impairment of loss 3,175,000

    2023
    2024
    Interest Income (12%) Projected CF Amortization Carrying Value
    - - - 5,225,000
    627,000 500,000 127,000 5,352,000
    642,240 1,000,000 (357,760) 4,994,240
    599,309* 2,000,000 (1,400,691) 3,593,549
    406,451 4,000,000 (3,593,549) 0

    Loan receivable 7,500,000


    Cash 7,500,000
    Impairment of loss 3,175,000
    Accrued Interest Receivable 900,000
    Allowance for loan impairment 2,275,000
    Cash 500,000
    Loan Receivable 500,000

    Allowance for loan impairment 627,000


    Interest Income 627,000
    Cash 1,000,000
    Loan Receivable 1,000,000

    Allowance for loan impairment 642,240


    Interest Income 642,240
    Cash 2,000,000
    Loan Receivable 2,000,000

    Allowance for loan impairment 599,309


    Interest Income 599,309
    Cash 4,000,000
    Loan Receivable 4,000,000

    Allowance for loan impairment 406,451


    Interest Income 406,451
    Cash 8,400,000
    Interest income 900,000
    Loan Receivable 7,500,000

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