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    The document contains two word problems involving notes receivable. The first problem involves a note receivable of $1,200,000 payable in 3 annual installments of $400,000 plus interest. It asks to calculate the interest income for 2016 and the non-current portion of the loan as of December 31, 2016. The second problem involves a debt restructuring agreement where the principal was reduced to $700,000, $120,000 interest was forgiven, the maturity was extended, and the interest rate was reduced. It asks to calculate the loan impairment loss for 2014 and the interest income for 2015.

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    The document contains two word problems involving notes receivable. The first problem involves a note receivable of $1,200,000 payable in 3 annual installments of $400,000 plus interest. It asks to calculate the interest income for 2016 and the non-current portion of the loan as of December 31, 2016. The second problem involves a debt restructuring agreement where the principal was reduced to $700,000, $120,000 interest was forgiven, the maturity was extended, and the interest rate was reduced. It asks to calculate the loan impairment loss for 2014 and the interest income for 2015.

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    The document contains two word problems involving notes receivable. The first problem involves a note receivable of $1,200,000 payable in 3 annual installments of $400,000 plus interest. It asks to calculate the interest income for 2016 and the non-current portion of the loan as of December 31, 2016. The second problem involves a debt restructuring agreement where the principal was reduced to $700,000, $120,000 interest was forgiven, the maturity was extended, and the interest rate was reduced. It asks to calculate the loan impairment loss for 2014 and the interest income for 2015.

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    210 views1 page

    Far 21

    Uploaded by

    memejane
    The document contains two word problems involving notes receivable. The first problem involves a note receivable of $1,200,000 payable in 3 annual installments of $400,000 plus interest. It asks to calculate the interest income for 2016 and the non-current portion of the loan as of December 31, 2016. The second problem involves a debt restructuring agreement where the principal was reduced to $700,000, $120,000 interest was forgiven, the maturity was extended, and the interest rate was reduced. It asks to calculate the loan impairment loss for 2014 and the interest income for 2015.

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    of 1

    DIFFICULT 1.

    On January 2, 2016, a tract of land that originally cost P800,000 was sold by MAYLENE
    CORPORATION. The company received a P1,200,000 note as payment. It bears interest rate of 4%
    and is payable in 3 annual installments of P400,000 plus interest on the outstanding balance. The
    prevailing rate of interest for a note of this type is 10%. The present value table shows the following
    present value factors of 1 at 10%:
    Present value factor of 1 for 3 periods 0.75132
    Present value factor of 1 for 2 periods 0.82645
    Present value factor of 1 for 1 period 0.90909
    Present value of an ordinary annuity of 1 for 3 periods 2.48685

    Q1. The interest income on the note receivable for the year ended December 31, 2016 using
    effective interest method is
    A. 120,000 B. 109,074 C. 107,685 D. 99,474
    Q2. What is Non-Current portion of the loan for the year ended December 31, 2016.
    A. 800,000 B. 736,530 C. 378,200 D. 0
    Q3. How much cash will MYLENE CORPORATION received from notes receivable?
    A. 1,076,47 B. 1,200,000 C. 1,296,000 D. 1,476,847

    AVERAGE 5. On December 31, 2014, Merciful Bank entered into a debt restructuring agreement with
    Miserable Corp., which was experiencing financial difficulties. A note for P1,000,000 and one year's
    accrued interest was due on this date from Miserable. The note receivable from Miserable was
    restructured as follows:
     reduced the principal obligation to P700,000.
     forgave the P120,000 of accrued interest for 2014.
     extended the maturity date to December 31, 2017.
     reduced the interest rate to 8%.
    Interest is payable annually on December 31, beginning 2015. In accordance with the agreement,
    Miserable made payments to Merciful Bank on December 31, 2015, 2016 and 2017.

    Q1. The loan impairment loss to be recognized in Merciful Bank’s 2014 profit or loss is
    A. P477,422 B. P420,000 C. P487,239 D. P0
    Q2. How much interest income should Merciful Bank report for the year ended December 31, 2015?
    P75,931 B. P64,258 C. P 56,000 D. P0

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