Chapter 1 Problem 5-29
12/31/2008 Impairment loss 338,500
Allowance for loan impairment 338,500
The remaining term of the loan is 4 years. Accordingly, the present value
factor for 4 periods is used.
Present value of principal (500,000 x .735) 367,500
Present value of interest (80,000 x 5 = 400,000 x .735) 294,000
Total present value of loan 661,500
Loan receivable 1,000,000
Present value of loan 661,500
Loan impairment loss 338,500
12/31/2009 Allowance for loan impairment 52,920
Interest income (8% x 661,500) 52,920
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