Activity in LOAN RECEIVABLE

1. Philadelphia Bank granted a loan to a borrower on January 1, 2020. The interest rate on the loan
is 10% payable annually starting December 31, 2020. The loan matures in five years on
December 31, 2024.

Principal amount 8,000,000

Origination fee received from borrower 700,000
Direct origination cost incurred 123,000

The effective rate on the loan after considering the direct origination cost incurred and
origination fee received is 12%.

Required:
a. Prepare necessary journal entries up to Dec. 31,2024.
b. Compute for the following:
1. What is the carrying amount of the loan receivable on January 1, 2020?
2. What is the interest income for 2020?
3. What is the carrying amount of the loan receivable on December 31, 2020?

2. Vesatile Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 10%
payable annually starting December 31, 2020. The loan matures in three years on December 31,
2022.

Principal amount 8,000,000

Origination fee charged against the borrower 684,200
Direct origination cost incurred 300,000

After considering the origination fee charged against the borrower and the direct origination
cost incurred, the effective rate on the loan is 12%.

a. Prepare necessary journal entries up to Dec. 31,2022.

b. Compute for the following:
1. What is the carrying amount of the loan receivable on January 1, 2020?
2. What is the interest income for 2020?
3. What is the carrying amount of the loan receivable on December 31, 2020?
4. What is the interest income for 2021?

3. On December 1, 2016, NACPAE Company gave Diwata Company a P 2,000,000, 12% loan.
NACPAE Company paid proceeds of P 1,940,000 after the deduction of a P 60,000
nonrefundable loan origination fee.
 Principal and interest are due in sixty monthly instalments of P 44,500, beginning January 1,
2017.

The repayments yield an effective interest rate of 12% at a present value of P 2,000,000 and
13.4% at a present value of P 1,940,000.

a. Prepare necessary journal entry on December 1, 2016.

b. Compute for the following

1. What amount of interest income should be reported in 2016?

2. What amount should be reported as accrued interest receivable on December 31, 2016?