Quiz on Loans Receivable - Mid Term Period 2 For three periods 2.

783
ADAPTED: Conrado T. Valix, Jose F. Peralta, & 4. What is the impairment loss for 2020?
Christian Aris M. Valix, Intermediate Accounting, a. 423,000
Volume 1, 2020 Edition b. 217,000
MULTIPLE CHOICE: (30 points) C. 222,000
Nos. 1 to 3 are related to the following information: d. 0
Moderate Bank granted a loan to a borrower on 5. What is the interest income for 2021? (Hint: Deduct
January 1, 2020. The interest on the loan is 10% the initial collection from the present value. of Dec. 31,
payable annually starting December 31, 2020. The 2020 before multiplying effective interest rate)
loan matures in three years on December 31, 2022. a. 126,160
Principal amount 5,000,000 b. 142,640
Direct origination cost incurred 100,000 c. 240,000
Indirect origination cost incurred 50,000 d. 0
Origination fee received from. 340,000 6. What is the carrying amount of the loan receivable
the borrower on December 31, 2021?
After considering the origination fee received from the a. 2,000,000
borrower and the direct origination cost incurred, the b. 1,925,640
effective rate on the loan is 12%. c. 1,640.360
1. What is the carrying amount of the loan receivable d. 1,783,000
on January 1, 2020?
a. 4,760,000 Nos. 7 to 9 are related to the following information:
b. 5,000,000 Global Bank loaned P9,000,000 to a borrower on
c. 4.810.000 January 1, 2018. The terms of the loan were payment
d. 4,660,000 in full on January 1, 2023, plus annual interest
2. What is the interest income for 2020? payment at 12%.
a. 571,200 The interest payment was made as scheduled on
b. 500,000 January 1, 2019. However, due to financial setbacks,
c. 476,000 the borrower was unable to make the 2020 interest
d. 547.200 payment.
3. What is the carrying amount of the loan receivable The bank considered the loan impaired and projected
on December 31, 2020? the cash flows from the loan on December 31, 2020.
a. 5,000,000 The bank has accrued the interest on December 31,
b. 4,760,000 2019, but did not continue to accrue interest for 2020
c. 4,831,200 due to the impairment of the loan. The projected cash
d. 4.910.944 flows are:
Date of cash flow & Amount projected on December
Nos. 4 to 7 are related to the following Information: 31, 2020
Solid Bank loaned P5,000,000 to a borrower on December 31, 2021 - 1,500,000
January 1, 2018. The terms of the loan require December 31, 2022 - 2,000,000
principal payments of P1.000,000 each year for 5 December 31, 2023 - 2,500,000
years plus interest at 8%. December 31, 2024 - 3,000,000
The first principal and interest payment is due on The present value of 1 at 12% is .89 for one period.
January 1, 2019. The borrower made the required 80 for two periods, .71 for three periods, and .64 for
payments during 2019 and 2020, four periods.
However, during 2020 the borrower began to 7. What is the loan impairment loss for 2020?
experience financial difficulties, requiring the bank to a. 2,370.000
reassess the collectability of the loan. b. 3,450,000
On December 31, 2020, the bank has determined that c. 6,630.000
the remaining principal payment will be collected as d. 2,450,000
originally scheduled but the collection of the interest is 8. What is the interest income for 2021?
unlikely. a. 795,600
The bank did not accrue the interest on December 31, b. 900,000
2020. c. 180,000
Present Value of an Annuity Due of 1 at 8%
9. What is the carrying amount of the loan receivable
on December 31, 20217
d. 0
a. 5,925,600
b. 4,845,600
c. 6,330,000
d. 7,500,000
The following information relate to No. 10:
On January 1, 2020, Oregon Bank recorded an
investment of P5,000,000 in a loan granted to a client.
The loan has a 10% effective interest rate payable
annually every December 31. The principal is due in
full at maturity on December 31, 2023.
Unfortunately, the borrower is experiencing significant
financial difficulty and will have difficult time in making
full payment.
The bank projected that the entire principal will be
paid at maturity and 4% interest or P200,000 will be
paid annually on December 31 of the next three
years. There is no accrued interest on December 31,
2020.
The present value of 1 at 10% for three periods is
0.75 and the present value of an ordinary annuity of 1
at 10% for three periods is 2.49.
10. What is the impairment loss for 2020?
a. 752,000
b. 600,000
c. 250,000
d. 748,000

Answer key:
1.a
2.a
3.c
4.b
5.b
6.b
7.b
8.a
9.a
10.a