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Prob 4

Grace Company had a P300,000 note receivable from Ngitngit Company with 9% annual interest paid annually. Ngitngit paid the 2008 interest but not 2009. On January 1, 2010, Grace agreed to: reduce principal to P250,000, forgive accrued interest, reduce interest rate to 6%, and extend maturity to December 31, 2012. Based on this, determine the present value of future cash flows, loss on impairment, valuation allowance, 2010 interest income, and carrying amount as of December 31, 2010.

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68 views

Prob 4

Grace Company had a P300,000 note receivable from Ngitngit Company with 9% annual interest paid annually. Ngitngit paid the 2008 interest but not 2009. On January 1, 2010, Grace agreed to: reduce principal to P250,000, forgive accrued interest, reduce interest rate to 6%, and extend maturity to December 31, 2012. Based on this, determine the present value of future cash flows, loss on impairment, valuation allowance, 2010 interest income, and carrying amount as of December 31, 2010.

Uploaded by

Karen Magsayo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PROB 4

Grace Company has an overdue note receivable from Ngitngit Company for P300,000. The note was
dated January 1, 2008. It has an annual interest rate of 9%, and interest is paid December 31 of each
year. Ngitngit paid the interest on the note on December 31, 2008, but Ngitngit did not pay the interest
due in December of 2009. The current effective interest rate is 6%.

On January 1, 2010, Grace agrees to the ff restructuring arrangement:


 Reduce the principal to P250,000.
 Forgive recorded accrued interest.
 Reduce the interest rate to 6%.
 Extend the maturity date of the note to December 31, 2012.

Based on the above and the result of your audit, answer the ff: (Round off present value factors to four
decimal places)

11. The present value of the future cash flows of the restructured loan is
a. P250,000 c. P233,145
b. P231,020 d. P238,613
12. The loss on impairment of loan to be recognized by Grace in 2010 is
a. P95,980 c. P88,387
b. P77,000 d. P93,855
13. The valuation allowance for impaired loans to be recognized on January 1, 2010 is
a. P16,855 c. P88,387
b. P 11,387 d. P18,890
14. The interest income to be recognized in 2010 is
a. P20,792 c. P21,475
b. P20,983 d. P15,000
15. The carrying amount of the loan as of December 31, 2010 is
a. P239,128 c. P236,812
b. P 245,088 d. P250,000

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