PSBA -MANILA PROBLEM 2

ACCOUNTING 3 V. R. ESPIRITU BPI loaned P10M to Good Venture Company on January 1, 2010. The terms
TOPIC: LOANS RECEIVABLE of the loan require principal payment of P2M each year for 5 years plus
interest at 10%. The 2010 and 2011 principal and interest payments were
TERMINOLOGIES: made. However, during 2012, Good Venture experienced financial
difficulties and was unable to make the principal and interest payment at
Loan receivable is a financial asset arising from a loan granted by a bank or the end of 2012. It was assessed that the remaining principal payments will
other financial institution to a borrower or client. be collected. The company cannot make good interest payment. The loan
receivable has carrying amount of P6.6M including accrued interest of
Initial measurement - Fair value plus transaction cost P600,000 on December 31, 2012. Cash flows on the loan on December 31,
Fair value is the transaction price or the amount of the loan granted 2012 as follows:
Subsequent measurement - at amortized cost Date of cash flows Projected Amount
Origination fees - fees charged by the bank against the borrower for the December 31, 2013 1M
creation of the loan. They are included in the measurement of the loan December 31, 2014 2M
receivable December 31, 2015 3M
A. Origination fees received from borrower
B. Direct origination ocst - not chargeable against borrower Present value at 10% follows:
One period 0.9091
Two period 0.8264
PROBLEM 1 Three period 0.7513
MetroBank granted a P10M loan to a borrower on January 1, 2012 with a
12% interest payable annually starting December 31, 2012. The loan Required: Present value of cash flows
matures on January 1, 2015. Other data are: Impairment loss
Origination fee received 663,600 Carrying amount on December 31, 2012
Direct Origination cost incurred 200,000

Required: 1. Carrying amount of the loan

2. Journal entries in 2012

Impairment of Loan - PAS 39 provides that an entity shall assess at every end
of reporting period whether there is objective evidence that a financial
asset or a group of financial assets is impaired.
Present value xxx
Less: Carrying value xxx
Impairment loss xxx