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  • Problem 7-5

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    Micah April Sabularse
    64 views2 pages
    This document contains information about a loan receivable that was impaired. It shows the present value of future cash flows from the loan is $5,020,000, while the carrying amount is $6,480,000, resulting in an impairment loss of $1,460,000 in 2020. It then provides journal entries to record cash receipts, reduce the loan balance and allowance for loan impairment, and recognize interest income in 2021 and 2022.

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    This document contains information about a loan receivable that was impaired. It shows the present value of future cash flows from the loan is $5,020,000, while the carrying amount is $6,480,000, resulting in an impairment loss of $1,460,000 in 2020. It then provides journal entries to record cash receipts, reduce the loan balance and allowance for loan impairment, and recognize interest income in 2021 and 2022.

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    64 views2 pages

    Problem 7-5

    Uploaded by

    Micah April Sabularse
    This document contains information about a loan receivable that was impaired. It shows the present value of future cash flows from the loan is $5,020,000, while the carrying amount is $6,480,000, resulting in an impairment loss of $1,460,000 in 2020. It then provides journal entries to record cash receipts, reduce the loan balance and allowance for loan impairment, and recognize interest income in 2021 and 2022.

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    © All Rights Reserved
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    Flag for inappropriate content
    of 2

    Problem 7-5

    Requirement 1

    December 31, 2021 (1,000,000 x .93) 930,000

    December 31, 2022 (2,000,000 x .86) 1,720,000

    December 31, 2023 (1,000,000 x .93) 2,370,000

    Total present value of loan 5,020,000

    Loan receivable – 12/31/20 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

    2020 Impairment loss 1,460,000

    Accrued interest receivable 480,000

    ` Allowance for loan impairment 980,000

    2021 Cash 1,000,000

    Loan receivable 1,000,000

    Allowance for loan impairment 401,600

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

    2022 Cash 2,000,000

    Loan receivable 2,000,000

    Allowance for loan impairment 353,728

    Interest income 353,728


    Loan receivable - 12/31/21 5,000,000

    Allowance for loan impairment (980,000 - 401,600) (578,400)

    Carrying amount – 12/31/21 4,421,600

    Interest income for 2022 (8% x 4,421,600) 353,728

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