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I Years Amount Compoundin G Per Year: 3,756,574.00 1,740,796.39 #DIV/0! #DIV/0!

This document compares the accounting treatment for a loan modification with and without substantial modification. When there is a substantial modification, where the interest rate increases from 10% to 14%, the new carrying amount is $6 million with $1.6 million in total interest expense. Without substantial modification, where the interest rate only increases to 6.46%, the new carrying amount is still $6 million but with only $1.1 million in total interest expense and no gain or loss.

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22 views4 pages

I Years Amount Compoundin G Per Year: 3,756,574.00 1,740,796.39 #DIV/0! #DIV/0!

This document compares the accounting treatment for a loan modification with and without substantial modification. When there is a substantial modification, where the interest rate increases from 10% to 14%, the new carrying amount is $6 million with $1.6 million in total interest expense. Without substantial modification, where the interest rate only increases to 6.46%, the new carrying amount is still $6 million but with only $1.1 million in total interest expense and no gain or loss.

Uploaded by

hmmmmn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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With substantial modification

compoundin
i years amount
g per year
PV
1 10.00% 3 1 5,000,000.00 3,756,574.00
annuity 10.00% 3 1 700,000.00 1,740,796.39
fv
1 #DIV/0!
annuity #DIV/0!

Old % 10%
New % 14%
New term 3

CA 5,000,000.00 6,000,000.00
Accrued intere 1,000,000.00 5,497,370.40
DTC 502,629.60
6,000,000.00
8%

Toal interest expense: 1,602,629.60


Less: gain (loss) - 502,629.60
Net effect in RE 1,100,000.08

No substantial modification

compoundin
i years amount
g per year
PV
1 6.46% 3 1 5,000,000.00 4,144,496.83
annuity 6.46% 3 1 700,000.00 1,855,467.76
fv
1 #DIV/0!
annuity #DIV/0!

Interpolated 6.46%
New % 14%
New term 3

CA 5,000,000.00 6,000,000.00
Accrued intere 1,000,000.00 5,999,964.59
DTC 35.41
6,000,000.00
0%

Toal interest expense: 1,100,000.00


Less: gain (loss) 35.41
Net effect in RE 1,100,035.41
Note: if w/ substantial modification, this must be more than 10%. However, mag assume lang ta na this is w/
substantial modification for purposes lang of contrasting the two computations.

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