Chapter 1 Problem 5-27
Requirement 1
December 31, 2009 ( 500,000 x .89) 445,000
December 31, 2010 (1,000,000 x .80) 800,000
December 31, 2011 (2,000,000 x .71) 1,420,000
December 31, 2012 (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 value 8,400,000
Present value of loan 5,225,000
Impairment loss 3,175,000
Requirement 3
2008 Impairment loss 3,175,000
Accrued interest receivable 900,000
Allowance for loan impairment 2,275,000
2009 Cash 500,000
Loan receivable 500,000
Allowance for loan impairment 627,000
Interest income (12& x 5,225,000) 627,000
2010 Cash 1,000,000
Loan receivable 1,000,000
Allowance for loan impairment 642,240
Interest income 642,240
Loan receivable – 12/31/2009 7,000,000
Allowance for loan impairment (2,275,000 – 627,000) (1,648,000)
Carrying value – 12/31/2009 5,352,000
Interest income for 2010 (12% x 5,352,000) 642,240
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