Far Eastern University

Institute of Accounts. Business and Finance

Department of Accountancy and Internal Auditing

INTERMEDIATE ACCOUNTING 1
RECEIVABLES
DO-IT-YOURSELF (PROBLEMS)

TABLE OF CONTENTS

M2.2E DIY - Problems (With Answer Key)

• Problem 2.2-1 Bad Debt Reporting
• Problem 2.2-2 Journal Entries - Comprehensive Accounts Receivable Problems
• Problem 2.2-3 Journal Entries - Notes Receivable
A. Various Notes Receivable Problems
B. Comprehensive Notes Receivable Problems
• Problem 2.2-4 Income Effects of Receivable Financing Transactions
• Problem 2.2-5 Loans Receivable

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

PROBLEM 2.2-1
Bad Debt Reporting

Presented below are series of unrelated situations:

1. In your audit of James Company the year 2020, you concluded that the allowance for doubtful accounts should
be adjusted to equal the estimated amount required based on aging of the accounts as of December 31. During
your audit, you were able to gather the following data:

Allowance for doubtful accounts, Jan 1, 2020 P600,000

Provision for doubtful accounts during 2020 (3% of 10M Sales) 300,000
Bad debts written-off in 2020 375,000
Recovery of bad debts written-off during 2020 100,000
Estimated doubtful accounts per aging of accounts on December 31, 2020 400,000
Accounts receivable, December 31, 2020 2,375,000

Based on the result of your audit, what is the correct doubtful accounts expense for the year 2020?

SOLUTION:
ADA DAE
Allowance for doubtful accounts, January 1, 2020 600,000
Provision for doubtful accounts during (2020 (3% of 10M Sales) 300,000 300,000
Bad debts written-off in 2020 (375,000)
Recovery of bad debts written-off during 2020 100,000
Allowance for doubtful accounts, December 31, 2020 625,000
Estimated doubtful accounts per aging of accounts on December 31, 2020 400,000
Credit to Doubtful Accounts Expense 225,000 (225,000)
Correct Doubtful Account Expense for the year 2020 75,000

2. The balances of selected accounts taken from the December 31, 2019 statement of financial position of Ram Inc.
are as follows:

Accounts Receivable P 337,000

Allowance for Uncollectible Accounts 12,000

The following transactions affecting accounts receivable occurred during the year ended December 31, 2016:

Sales (all on account, terms: 2/10, 1/15, n/60) P 1,500,000

Cash Received from customers: 1,600,000
From customers paying within the 10-day discount period 882,000
From customers paying within the 15-day discount period 495,000
From recovery of accounts written off 3,000
From customers paying beyond the discount period ???
Accounts Receivable written off as worthless 11,000
Credit memoranda for sales returns 6,000

Based on assessment of the collectability of the accounts, impairment loss recognized on accounts receivable is
P 15,000.

What is the balance of Allowance for Doubtful Accounts at December 31, 2020?

SOLUTION:
AR ADA
Balances, January 1, 2020 337,000 12,000
Sales (all on account, terms: 2/10, 1/15, n/60) 1,500,000
Cash Received from customers:
From customers paying within the 10-day discount period
(P 882,000 / 98%) (900,000)
From customers paying within the 15-day discount period
(P 495,000 / 99%) (500,000)
From recovery of accounts written off - 3,000
From customers paying beyond the discount period
(P 1,600,000 – P 882,000 – P 3,000 - P 495,000) (220,000)
Accounts Receivable written off as worthless (11,000) (11,000)
Credit memoranda for sales returns 6,000

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

Impairment loss on accounts receivable (15,000) 15,000

Account Receivable balances, December 31, 2020, adjusted 194,000
Allowance for D/A balance, December 31, 220, adjusted 19,000

3. The Financial Statements of Sherina Company reported the following selected accounts:

Accounts Receivable, January 1, 2020 1,200,000

Allowance for uncollectible accounts, January 1, 2020 60,000
Sales during 2020 10,000,000
Cash collected from customers 8,720,000

The cash collected from customers included a P 20,000 recovery from a customer whose account was written off
in prior year. On November 15, a customer settled his overdue account by issuing a 15%, 4-month note for P
400,000. During 2020, accounts of P 100,000 were written off as worthless.

Analysis of the accounts receivable at December 31, 2020 revealed that P 600,000 were considered past due.
Management’s estimate of probable loss on past due accounts is 20% and on current accounts at 5%.

What is the Amortized Cost/Net Realizable Value of the accounts receivable at December 31, 2020?

SOLUTION:
Accounts Allowance
Receivable for D/A
Beginning balances, January 1, 2020 1,200,000 60,000
Sales during 2020 10,000,000
Cash collected from customers (8,720,000)
Re-establishment of accounts previously written off but recovered 20,000 20,000
Settled by receiving a promissory note (400,000)
Accounts written off for the year 2020 (100,000) (100,000)
Ending balances, December 31, 2020, unadjusted 2,000,000 (20,000) Dr.
Required ADA based on aging of AR:
Past due – P 600,000 x 20% (120,000)
Current [ (P 2,000,000 – P 600,000) x 5% (70,000)
Ending balances, December 31, 2020, adjusted 2,000,000 210,000
Allowance for Doubtful Accounts, adjusted, 12/31/2020 (210,000)
Net realizable value of AR, 12/31/2020 1,790,000

4. Xeres Company has estimated its bad debt expense by using 1% of net sales. However, the company is
contemplating aging its accounts receivable and using this as a basis for estimating its bad debts, as it is
believed that this will provide a better estimate of the uncollectible accounts. The following aging schedule was
prepared as of November 30 of the current year, the end of the fiscal year.

Age of Account Amount Percent Estimated to Be Uncollectible

Under 60 days P730,000 1
61-90 days 40,000 6
91-120 days 18,000 9
Over 120 days 72,000 25

Net sales for the year were P4,200,000. There is a debit balance of P14,000 in the allowance for uncollectible
accounts as of November 30 of the current year.

If Xeres estimates its bad debts by aging the accounts receivable, the adjusting entry to allowance for
uncollectible accounts made on November 30 of the current year will be for?

SOLUTION:
Debit Credit
Doubtful Accounts Expense 43,320
Allowance for Doubtful Accounts 43,320

Supporting computation:
Allowance for Doubtful Accounts, November 30, 2020 (Debit) 14,000

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

Allowance for Doubtful Accounts, November

30, 2020, adjusted
Under 60 days -P 730,000 x 1% 7,300
61-90 days – P 40,000 x 6% 2,400
91-120 days – P 18,000 x 9% 1,620
Over 120 days – P 72,000 x 25% 18,000 29,320
Doubtful Accounts Expense for November 43,320

5. Using the same information in number (4) except that Xeres estimates its bad debts by continuing to use the
percentage of net sales, the balance in the allowance for uncollectible accounts after the adjusting entry is made
at November 30 of the current year will be?

SOLUTION:
Allowance for Doubtful Accounts, November 30, 2020 (Debit) (14,000)
Doubtful Accounts Expense for November based on net sales
Net sales 4,200,000
Multiply by Doubtful Accounts Rate based on sales 1% 42,000
Allowance for Doubtful Accounts, November 30, 2020, 28,000
adjusted

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

PROBLEM 2.2-2
Journal Entries – Comprehensive Accounts Receivable Problems

Presented below are series of unrelated situations. Prepare the related journal entries to record the transactions.

1. Fiancee Company record sales credit to accounts receivable. However, at the end of the accounting, the entity
estimates the probable sales returns and records the same by means of an allowance account. The following
transactions occurred in summary form:

Sale of merchandise on account, 2/10, n/30 4,000,000

Collection within the discount period 1,470,000
Collection beyond the discount period 1,000,000
Sales return granted 100,000
Sales return estimated at the end of the year 40,000

SOLUTION:
No. Transactions Account Names Debit Credit
1. Sale of merchandise on Accounts Receivable 4,000,00
account, 2/10, n/30 0
Sales 4,000,00
0

2. Collection within the Cash 1,470,00

discount period 0
Sales Discount [(P 1,470,000/98%) x 2%] 30,000
Accounts Receivable 1,500,00
0

3. Collection beyond the Cash 1,000,00

discount period 0
Accounts Receivable 1,000,00
0

4. Sales return granted Sales Returns 100,000

Accounts Receivable 100,000

5. Sales return estimated at Sales Returns 40,000

the end of the year Allowance for Sales Returns 40,000

(Adapted from Intermediate Accounting Textbook)

2. The statement of financial position of Starsky Company at December 31, 2020, includes the following:

Notes Receivable 360,000

Accounts Receivable 1,821,000
Less: Allowance for Doubtful Accounts 173,000 2,008,000

Transactions in 2020 include the following:

a) Accounts Receivable of P 1,380,000 were collected including accounts of P 600,000 on which 2% sales

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

discounts were allowed.

b) P 53,000 was received in payment of an account which was written off the books as worthless in 2020.
(Hint: Reestablish the receivable account)
c) Customer accounts of P 175,000 were written off during the year.
d) At year-end the Allowance for Doubtful Accounts was estimated to need a balance of P 200,000. This
estimate is based on an analysis of aged accounts receivable.

SOLUTION:
No. Transactions Account Names Debit Credit
1. Accounts Receivable of P Cash (P 1,380,000 – P 12,000) 1,368,00
138,000 were collected 0
including accounts of P Sales Discounts (P 600,000 x 2%) 12,000
600,000 on which 2% Accounts Receivable 1,380,00
sales discounts were 0
allowed.

2. P 53,000 was received in Accounts Receivable 53,000

payment of an account Allowance for Doubtful Accounts 53,000
which was written off the
books as worthless in
2020. (Hint: Reestablish Cash 53,000
the receivable account) Accounts Receivable 53,000

No. Transactions Account Names Debit Credit

3. Customer accounts of P Allowance for Doubtful Accounts 175,000
175,000 were written off Accounts Receivable 175,000
during the year.

4. At year-end the Allowance Doubtful Accounts Expense 149,000

for Doubtful Accounts was Allowance for Doubtful Accounts 149,000
estimated to need a
balance of P 200,000. This
estimate is based on an
analysis of aged accounts ADA, required balance 200,000
receivable. ADA, unadjusted:
Unadjusted at 12/31/2020 173,000
Transaction No. 2 53,000
Transaction No 3 (175,000) (51,000)
Doubtful Accounts Expense 149,000

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

PROBLEM 2.2-3
Journal Entries – Notes Receivable

Problem 2.2-3A (Various Notes Receivable Problems)

Presented below are series of unrelated situations.

1. On March 1, 2020, Jacobs Company sold goods to a customer. The customer signed a noninterest bearing
note requiring payment of P120,000 annually for seven years. The first payment was made on March 1, 2020.
The going rate of interest for this type of note at the date of issuance was 10%. How much should Jacobs
Company report as sales revenue in March 2020? (Round off present value factor to two decimal places)

SOLUTION:
Cash payment made on May 1, 2020 120,000
Present value of P 120,000 at 10% for 6 years
(P 120,000 x 4.36 PVF) 523,200
Sales Revenue in March 2020 643,200

2. On December 31, 2018, Richfellow Corp. borrowed from Bank of Manila, signing a 5-year non-interest-bearing
note for P100,000. The note was issued to yield 10% interest. Unfortunately, during 2020, Richfellow Corp.
began to experience financial difficulty. As a result, at December 31, 2020, Bank of Manila determined that it
was probable that it would receive back only P75,000 at maturity. The market rate of interest on loans of this
nature is now 11%. How much should be recognized by Bank of Manila as credit loss in 2020? (Round final
answer to the nearest peso.)

SOLUTION:
CV, 12/31/20 75,131.48
PV of New Cash Flows (P 75,000 x 0.75131 PVF) (56,348.61)
Credit loss in 2020 18,782.87

3. On January 1, 2018, Mead Co. exchanged equipment for a P200,000, noninterest bearing note due on January
1, 2021. The prevailing rate of interest for a note of this type at January 1, 2019 was 10%. The present value of
P1 at 10% for three periods is 0.75. What amount of interest revenue should be included in Mead’s 2020 income
statement?

SOLUTION:

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

P 16,500

4. GGWP Co. purchased from Quitter Co. a P20,000, 8%, 5-year note that required five equal annual year-end
payments of P5,009. The note was discounted to yield a 9% rate to GGWP. At the date of purchase, GGWP
recorded the note at its present value of P19,485. What should be the total interest revenue earned by GGWP
over the life of this note?

SOLUTION:
P 5,560

5. As of December 31, 2020, Sam Corporation had outstanding note receivable dated October 1, 2020 with face
amount of P745,000, tenor of 3 years, and nominal interest of 8% payable in arrears. Market rate of interest at
the date of issuance was 10%.

PV of 1 at 10% for 3 periods 0.7513

PV of ordinary annuity of 1 at 10% for 3 2.4869
periods

What amount of accrued interest receivable should Sam Corporation record as of December 31, 2020?

SOLUTION:
P 14,900

6. On January 1, 2014, Smaug Inc. sold an air-conditioning unit to Laketown Corp. with cash price of P800,000.
Laketown signed a noninterest bearing note to make equal payments to Smaug Inc. over 5 years starting
December 31, 2014. If market rate of interest is 12% as of January 1, 2014, how much annual payments will
Smaug Inc. receive based on the noninterest bearing note? (Round off PV factors up to four decimal places.)

SOLUTION:
P 221,926

7. On January 1, Panther Corporation received one-year 12% note receivable with a face value of P100,000 from
one of its customers. On October 1, Panther Corporation discounted the note to Peaceful Bank to meet some of
its maturing obligations. The bank’s rate in discounting the note is 14%. Assuming the transaction is treated as
conditional sale, what is the journal entry of Panther Corporation to record the discounting?

SOLUTION:
Account Names Debit Credit
Cash 108,080
Gain on Notes Receivable Discounting 4,160
Notes Receivable Discounted 100,000
Interest Income 3,920

Supporting computation:
Interest at maturity date = P 100,000 x 12% x 1 year = P 12,000
Maturity value = P 100,000 x P 12,000 = P 112,000
Interest earned on discounting date = P 100,000 x 12% x 9/12 = P 9,000
Discount = P 112,000 x 14% x 3/12 = P 3,920
Proceeds = P 112,000 – P 3,920 = P 108,080

Problem 2.2-3B (Comprehensive Notes Receivable Problems)

(Adapted from Intermediate Accounting Textbook)
Braddock, Inc. had the following long-term receivable account balances at December 31, 2019:

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

Notes Receivable from sale of division 1,500,000

Notes receivable from officer 400,000

Transactions during 2020 and other information relating to Braddock’s long-term receivables were as follows:

1. The P 1,500,000 note receivable is date May 1, 2019, bear interest at 9%, and represents the balance of the
consideration received from the sale of Braddock’s electronics division in New York Company. Principal
payments of P 500,000 plus appropriate interest are due on May 1, 2020, 2021 and 20222. The first principal
and interest payment was made on May 1, 2020. Collection of the note installments is reasonably assured.
2. The P 400,000 note receivable is dated December 31, 2019, bears interest at 8%, and is due on December 31,
2012. The note is due from Sean May, president of Braddock, Inc. and is collateralized by 10,000 of Braddock’s
ordinary shares. Interest s payable annually on December 31, and all interest payments were paid on their due
dates through December 31, 2020. The quoted market price of Braddock’s ordinary shares was P 45 per share
on December 31, 2020.
3. On April 1, 2020, Braddock sold a patent to Pennsylvania Company for a P 100,000 zero-interest bearing note
due on April 1, 2022. There was no established exchange price for the patent, and the note had no ready market.
The prevailing interest rate for a not of this type at April 1, 2020 was 2%. The present value of P 1 for two periods
at 12% is 0.797 (use this factor). The patent had a carrying value of P 40,000 at January 1, 2020, and the
amortization for the year ended December 31, 2020, would have been P 8,000. The collection of the note
receivable from Pennsylvania is reasonably assured.
4. On July 1, 2020, Braddock sold a parcel of land to Splinter Company for P 200,000 under an installment sale
contract. Splinter made a P 60,000 cash down payment on July 1, 2020 and signed a 4-year 11% note for the P
140,000 balance. The equal annual payments of principal and interest on the note will be P 45,124 payable on
July 1, 2021, through July 1, 2024. The land could have been sold at an established cash price of P 200,000 The
cost of the land to Braddock was P 150,000. Circumstances are suck that the collection of the installments on the
note is reasonably assured.

Instructions:
a) Prepare the long-term receivables section of Braddock’s statement of financial position at December 31, 2020.
b) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that
would appear in Braddock’s statement of financial position at December 31, 2020.
c) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Braddock’s
income statement for the year ended December 31, 2020.

SOLUTION:
Requirement (a) – Long-term Receivable Section of Braddock’s SFP at 12/31/2020
BRADDOCK INC.
Long-Term Receivables Section of Statement of Financial Position
December 31, 2020
9% note receivable from sale of division, due in annual installments of
P 500,000 to May 1, 2022, less current installment P 500,000 (1)
8% note receivable from officer, due Dec. 31, 2022, collateralized by 10,000
shares of Braddock, Inc., common stock with a fair value of $450,000 400,000
Zero-interest-bearing note from sale of patent, net of 12% imputed interest,
due April 1, 2022 86,873 (2)
Installment contract receivable, due in annual installments of $45,125 to
July 1, 2024, less current installment 110,275 (3)
Total long-term receivables P 1,097,148

Requirement (b) – Current Portion of Long-term Receivable Section of Braddock’s SFP at 12/31/2020
BRADDOCK INC.
Partial Statement of Financial Position Balances
December 31, 2020
Current portion of long-term receivables:
Note receivable from sale of division P 500,000 (1)
Installment contract receivable 29,725 (3)
Total current portion of long-term receivables P 529,725

Accrued interest receivable:

Note receivable from sale of division 60,000 (4)
Installment contract receivable 7,700 (5)
Total accrued interest receivable P 67,700

Requirement (c) – Schedule showing interest revenue from LTNR in Income Statement for the year ended

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

12/31/2020

BRADDOCK INC.
Interest Revenue from Long-Term Receivables
For the Year Ended December 31, 2020
Interest income:
Note receivable from sale of division P 105,000 (6)
Note receivable from sale of patent 7,173 (2)
Note receivable from officer 32,000 (7)
Installment contract receivable from sale of land 7,700 (5)
Total interest income for year ended 12/31/2020 P 151,873
Explanation of Amounts
(1) Long-term Portion of 9% Note Receivable at 12/31/20
Face amount, 5/1/2019 P 1,500,000
Less: Installment received 5/1/2020 500,000
Balance, 12/31/20 P 1,000,000
Less: Installment due 5/1/2021 500,000
Long-term portion, 12/31/2020 P 500,000

(2) Zero-interest-bearing Note, Net of Imputed Interest at 12/31/2020

Face amount 4/1/2020 P 100,000
Less: Imputed interest [P100,000 – (P 100,000 X 0.797)] 20,300
Balance, 4/1/2019 P 79,700
Add: Interest earned to 12/31/2020 (P 79,700 X 12% X 9/12) 7,173
Balance, 12/31/2020 P 86,873

(3) Long-term Portion of Installment Contract Rec. at 12/31/2020

Contract selling price, 7/1/2020 P 200,000
Less: Down payment, 7/1/2020 60,000
Balance, 12/31/10 P 140,000
Less: Installment due, 7/1/2020 [P 45,125 – (P 140,000 X 11%)] 29,725
Long-term portion, 12/31/21 P 110,275

(4) Accrued Interest—Note Rec., Sale of Division at 12/31/2020

Interest accrued from 5/1 to 12/31/2020
(P 1,000,000 X 9% X 8/12) P 60,000

(5) Accrued Interest—Installment Contract at 12/31/2020

Interest accrued from 7/1 to 12/31/2020 (P 140,000 X 11% X 1/2) P 7,700

(6) Interest Revenue—Note Receivable, Sale of Division, for 2020

Interest earned from 1/1 to 5/1/2020 (P 1,500,000 X 9% X 4/12) P 45,000
Interest earned from 5/1 to 12/31/20 (P 1,000,000 X 9% X 8/12) 60,000
Interest income P 105,000

(7) Interest Revenue—Note Receivable, Officer, for 2010

Interest earned 1/1/ to 12/31/10 (P 400,000 X 8%) P 32,000

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

PROBLEM 2.2-4
Income Effects of Receivable Financing Transactions

(Adapted from Intermediate Accounting Textbook)

Sandburg Company requires additional cash for its business. Sandburg has decided to use its accounts receivable to
raise additional cash and kas asked you determine the income statement effects of the following contemplated
transactions.

1. On July 1, 2020, Sandburg assigned P 400,000 of accounts receivable to Keller Finance Company.
Sandburg received an advance from Keller of 80% of the assigned accounts receivable less a commission
of 3% on the advance. Prior to December 31, 2020, Sandburg collected P 220,000 on the assigned
accounts receivable, and remitted P 232,720 to Keller, P 12,720 of which represented interest on the
advance from Keller.

2. On December 1, 2020, Sandburg sold P 300,000 of net accounts receivable to Wunsch Company for P
270,000. The receivables were sold outright on a without guarantee (recourse) basis.

3. On December 31, 2020, an advance of P 120,000 was received from First Bank by pledging P 160,000 of
Sandburg’s accounts receivable. Sandburg’s first payment to First Bank is due on January 30, 2021.

Instructions:
Prepare a schedule showing the income statement effects for the year ended December 31, 2020, as a result of the
above facts.

SOLUTION:

SANDBURG COMPANY
Income Statement Effects
For the Year Ended December 31, 2020
Expenses resulting from accounts receivable assigned (Schedule 1) P 22,320
Loss resulting from accounts receivable sold (P 300,000 – P 270,000) 30,000
Total expenses P 52,320

Schedule 1
Computation of Expense
for Accounts Receivable Assigned
Assignment expense:
Accounts receivable assigned P 400,000
x 80%
Advance by Keller Finance Company P 320,000
x 3% P 9,600
Interest expense 12,720
Total expenses P 22,320

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

PROBLEM 2.2-5
Loan Receivable

(Adapted from Intermediate Accounting Textbook)

On December 31, 2020, London Bank granted a P 5,000,000 loan to a borrower with 10% stated rate payable
annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%.

Unfortunately, the financial condition of the borrower worsened because of the lower revenue.

On December 31, 2022, the bank determined that the borrower would pay back only P 3,000,000 of the principal at
maturity.

However, it was considered likely that interest would continue to be paid on the P 5,000,000 loan.

The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods.

The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods.

QUESTIONS:
1. What is the amount of cash paid to the borrower on December 31, 2020?

SOLUTION:
Present value of principal amount
(P 5,000,000 x 0.57 PVF) 2,850,000
Present value of annual interest collection:
(P 5,000,000 x 10% stated rate x 3.60 PVF) 1,800,000
Present value/Cash paid to borrower on 12/31/2020 4,650,000
(Letter D)

Principal amount (at face value/amount) 5,000,000

Present value of future cash flows (4,650,000)
Unearned Interest Income 350,000

Related Journal Entry:

Loan Receivable (at face amount) 5,000,000
Unearned Interest Income 350,000
Cash 4,650,000

2. What is the carrying amount of the loan receivable on December 31, 2022?

SOLUTION:
Interest Interest Amortization Carrying
Received Income of Unearned Amount or
at 10% (PV x ER of Interest Present
(PRT) 12%) Income Value
Date
12/31/2020 4,650,000
12/31/2021 500,000 558,000 58,000 4,708,000
12/31/2022 500,000 564,960 64,960 4,772,960
(Letter C)

3. What is the impairment loss on loan receivable to be recognized for 2022?

SOLUTION:
Carrying value at December 31, 2022 4,772,960
Present value of expected future cash flows:
Principal – P 3,000,000 x 0.71 PVF 2,130,000
Interest – P 500,000 x 2.40 PVF 1,200,000 (3,330,000)
IMPAIRMENT LOSS FOR 2022 1,442,960

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

(Letter B)

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