Chapter 1 Problem 5-28
December 31, 2011 ( 360,000 x .772) 277,920 Face value of loan 4,000,000
December 31, 2012 ( 360,000 x .708) 254,880 Present value of loan 3,365,360
December 31, 2013 ( 360,000 x .650) 234,000 Impairment loss 634,640
December 31, 2014 (4,360,000 x .596) 2,598,560
Total present value of loan 3,365,360
2008 Cash 360,000
Interest income 360,000
Impairment loss 634,640
Allowance for loan impairment 634,640
2009 Allowance for loan impairment 302,882
Interest income (9% x 3,365,360) 302,882
2010 Allowance for loan impairment 331,758
Interest income (634,640 – 302,882) 331,758
2011 Cash 360,000
Interest income 360,000
2012 Cash 360,000
Interest income 360,000
2013 Cash 360,000
Interest income 360,000
2014 Cash 4,360,000
Interest income 360,000
Loan receivable 4,000,000
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