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    Dec. 31, 2016 Dec. 31, 2017

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    Live Love
    On January 1, 2014, Sinait Company loaned P3,000,000 to Ilocos Company at an annual interest rate of 11% to be paid in full on January 1, 2019. Ilocos paid the interest on time in 2015 but was unable to make the 2016 payment due to financial difficulties. As of December 31, 2016 and 2017, Sinait projected the following cash flows from the loan which it considers impaired. It stopped accruing interest after 2015 due to the impairment.

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    Dec. 31, 2016 Dec. 31, 2017

    Uploaded by

    Live Love
    73 views1 page
    On January 1, 2014, Sinait Company loaned P3,000,000 to Ilocos Company at an annual interest rate of 11% to be paid in full on January 1, 2019. Ilocos paid the interest on time in 2015 but was unable to make the 2016 payment due to financial difficulties. As of December 31, 2016 and 2017, Sinait projected the following cash flows from the loan which it considers impaired. It stopped accruing interest after 2015 due to the impairment.

    Original Title

    PROBLEM NO4

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    On January 1, 2014, Sinait Company loaned P3,000,000 to Ilocos Company at an annual interest rate of 11% to be paid in full on January 1, 2019. Ilocos paid the interest on time in 2015 but was unable to make the 2016 payment due to financial difficulties. As of December 31, 2016 and 2017, Sinait projected the following cash flows from the loan which it considers impaired. It stopped accruing interest after 2015 due to the impairment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    73 views1 page

    Dec. 31, 2016 Dec. 31, 2017

    Uploaded by

    Live Love
    On January 1, 2014, Sinait Company loaned P3,000,000 to Ilocos Company at an annual interest rate of 11% to be paid in full on January 1, 2019. Ilocos paid the interest on time in 2015 but was unable to make the 2016 payment due to financial difficulties. As of December 31, 2016 and 2017, Sinait projected the following cash flows from the loan which it considers impaired. It stopped accruing interest after 2015 due to the impairment.

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    On January 1, 2014, Sinait Company loaned P3,000,000 to Ilocos Company.

    The terms of the loan were payment in full on


    January 1, 2019, plus annual interest payments at 11%. The interest payment was made as scheduled on January 1, 2015;
    however, due to financial setbacks, Ilocos was unable to make its 2016 interest payment. Sinait considers the loan impaired
    and projects the following cash flows from the loan as of December 31, 2016 and 2017. Assume that Sinait accrued the
    interest at December 31, 2015, but did not continue to accrue interest due to the impairment of the loan.
    Amount projected as of
    Date of Flow Dec. 31, 2016 Dec. 31, 2017
    December 31, 2017 P 200,000 P 200,000
    December 31, 2018 400,000 600,000
    December 31, 2019 800,000 1,200,000
    December 31, 2020 1,200,000 1,000,000
    December 31, 2021 400,000
    QUESTIONS:
    Your client requested you to determine the following: (Round-off present value factors to four decimal places)
    1. Loan impairment (bad debt expense) for the year 2016
    2. Interest income for 2017 assuming the P200,000 was collected on December 31, 2017 as scheduled
    3. Allowance for loan impairment as of December 31, 2017
    4. Interest income for 2018 assuming the P600,000 was collected on December 31, 2018 as scheduled
    5. Carrying amount of loan receivable as of December 31, 2018

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