SITUATION NO.

1
1. At what amount shall the loan be initially measurement on January 1, 2022? 2. Prepare necessary journal entry on January 1, 2022 to record the loan transaction.

Principal amount 1,000,000 DATE ACCOUNT TITLE DEBIT CREDIT

Origination fees received from the customer -55,200 1/1/2022 Loan Receivable 1,000,000.00
Direct origination cost incurred 30,770 Cash 1,000,000.00
Initial carrying amount of loan receivable 975,570
Cash 55,200.00
Unearned Interest Income 55,200.00

3. How much shall be reported as interest income for 2022? Unearned Interest Income 30,770.00
Cash 30,770.00
Interest
Received Interest Income
(1,000,000 x (Carrying Carrying
Date 10%) amount * 11%) Amortization Amount
1/1/2022 ---------- ---------- ---------- 975,570.00 Expense 5,000.00
12/31/2022 100,000.00 107,312.70 7,312.70 982,882.70 Cash 5,000.00
12/31/2023 100,000.00 108,117.10 8,117.10 990,999.80
12/31/2024 100,000.00 109,009.89 9,009.89 1,000,009.69
109,000.20 9,000.20 1,000,000.00
5. Prepare necessary journal entry on December 31, 2022.
INTEREST INCOME FOR 2022 107,312.70
DATE ACCOUNT TITLE DEBIT CREDIT
12/.31/2022 Cash 100,000.00
Interest Income 100,000.00
4. What is the carrying amount of the loan on December 31, 2022?
Unearned Interest Income 7,312.70
Interest
Received Interest Income
(1,000,000 x (Carrying Carrying
Date 10%) amount * 11%) Amortization Amount Interest Income 7,312.70
1/1/2022 ---------- ---------- ---------- 975,570.00
12/31/2022 100,000.00 107,312.70 7,312.70 982,882.70
12/31/2023 100,000.00 108,117.10 8,117.10 990,999.80
12/31/2024 100,000.00 109,009.89 9,009.89 1,000,009.69
109,000.20 9,000.20 1,000,000.00

CARRYING AMOUNT FOR 2022 982,882.70

SITUATION NO. 2
1. At what amount shall the loan be initially measurement on January 1, 2022?

Principal amount 1,000,000

Origination fees received from the customer -44,900
Direct origination cost incurred 120,856
Initial carrying amount of loan receivable 1,075,956

2. How much shall be reported as interest income for 2022?

Interest
Received Interest Income
(1,000,000 x (Carrying Carrying
Date 12%) amount * 9%) Amortization Amount
1/1/2022 ---------- ---------- ---------- 1,075,956.00
12/31/2022 120,000.00 96,836.04 -23,163.96 1,052,792.04
12/31/2023 120,000.00 94,751.28 -25,248.72 1,027,543.32
12/31/2024 120,000.00 92,478.90 -27,521.10 1,000,022.22
92,456.68 -27,543.32 1,000,000.00

INTEREST INCOME FOR 2022 96,836.04

3. What is the carrying amount of the loan on December 31, 2022?

Interest
Received Interest Income
(1,000,000 x (Carrying Carrying
Date 12%) amount * 9%) Amortization Amount
1/1/2022 ---------- ---------- ---------- 1,075,956.00
12/31/2022 120,000.00 96,836.04 -23,163.96 1,052,792.04
12/31/2023 120,000.00 94,751.28 -25,248.72 1,027,543.32
12/31/2024 120,000.00 92,478.90 -27,521.10 1,000,022.22
92,456.68 -27,543.32 1,000,000.00

CARRYING AMOUNT FOR 2022 1,052,792.04

CASE 1
Both parties agreed on the following modified terms-

- Condonationof half of the accrued interest, the other half will be paid on the restructing date.

- Extension of maturity date to December 31, 2022 with no interest during the extended term.

1. What is the present value of the expected future cash flows as of the restructing date?

5,000,000 * 0.873 = 4,365,000

2. How much is the impairment loss to be recognized for 2020?

5,000,000 - 4,365,000 = 635,000 + 250,000 = 885,000

3. How much is the interest income for 2021?

5,000,000 * 7% = 350,000

4. What is the carrying value of the loan receivable on December 31, 2021?

5,000,000 + 350,000 = 535,000

CASE 3
Both parties agreed on the modified terms -

- Condonation of accrued interest.

- Installment principal payment of P 500,000, P 1,500,000, P 3,000,000 plus 7% interest on unpaid balance December 31, 2021, 2022 and 2023, respectively.

1. What is the present value of the expected future cash flows as of the restructing date?

2021 5,000,000 + 385,000 0.934 826,590

885,000

2022 1,500,000 + 350,000 0.873 1,615,050

1,850,000

2023 245,000 + 3,000,000 0.816 2,647,920

3,245,000

5,089,560

2. How much is the impairment loss to be recognized for 2020?

5,550,000 - 5,089,560 = 410,440

3. How much is the interest income for 2021?

5,500,000 * 7% = 385,000

4. What is the carrying value of the loan receivable on December 31, 2021?

5,000,000