Required:

Prepare journal entries for 2022, 2023, and 2024

Principal amount 4,000,000
Direct origination cost incurred 150,000
Origination fee received from the customer 342,100

Principal amount 4,000,000

Direct origination cost incurred 150,000
Origination fee received from the customer (342,100)
Initial carrying amount of loan 3,807,900

2022
Jan. 1 Loan Receivable 4,000,000
Cash 4,000,000
To record loan.

Unearned interest income 150,000

Cash 150,000
To record direct origination cost incurred.

Cash 342,100
Unearned interest income 342,100
To record received origination fee.

Date Interest Received Interest Income Amortization

Jan. 1 2022
Dec. 31 2022 400,000 456,948 56,948
Dec. 31 2023 400,000 463,782 63,782
Dec. 31 2024 400,000 471,371 71,371

2022
Dec. 31 Cash 400,000
Interest income 400,000
To record received interest.

Unearned interest income 56,948

Interest income 56,948
To record interest income.

2023
Dec. 31 Cash 400,000
Interest income 400,000
To record received interest.

Unearned interest income 63,782

Interest income 63,782
To record interest income.
 2024
Dec. 31 Cash 400,000
Interest income 400,000
To record received interest.

Unearned interest income 71,371

Interest income 71,371
To record interest income.

Cash 4,000,000
Loan Receivable 4,000,000
To record received cash from loan receivable.
Carrying Amount
3,807,900
3,864,848
3,928,630
4,000,000
Required:
1. Compute the carrying amount of the loan receivable on January 1, 2022.
Principal amount 4,000,000
Direct origination cost incurred 61,500
Origination fee received from the customer 350,000

Principal amount 4,000,000

Direct origination cost incurred 61,500
Origination fee received from the customer (350,000)
Initial carrying amount of loan 3,711,500

2. Prepare a table of amortization for the loan receivable.

Date Interest Received Interest Income Amortization
Jan. 1 2022
Dec. 31 2022 400,000 445,380 45,380
Dec. 31 2023 400,000 450,826 50,826
Dec. 31 2024 400,000 456,925 56,925
Dec. 31 2025 400,000 463,756 63,756
Dec. 31 2026 400,000 471,614 71,614

3. Prepare the journal entries for 2022 and 2023.

2022
Dec. 31 Cash 400,000
Interest income 400,000
To record received interest.

Unearned interest income 45,380

Interest income 45,380
To record interest income.

2023
Dec. 31 Cash 400,000
Interest income 400,000
To record received interest.

Unearned interest income 50,826

Interest income 50,826
To record interest income.

Cash 4,000,000
Loan Receivable 4,000,000
To record received cash from loan receivable.
Carrying Amount
3,711,500
3,756,880
3,807,706
3,864,630
3,928,386
4,000,000
Required:
1. Prepare journal entries for 2022, 2023, and 2024.
Principal amount 3,000,000
Direct origination cost incurred 260,300
Origination fee received from the customer 100,000

Principal amount 3,000,000

Direct origination cost incurred 260,300
Origination fee received from the customer (100,000)
Initial carrying amount of loan 3,160,300

2022
Jan. 1 Loan Receivable 3,000,000
Cash 3,000,000
To record loan.

Unearned interest income 260,300

Cash 260,300
To record direct origination cost incurred.

Cash 100,000
Unearned interest income 100,000
To record received origination fee.

Date Interest Received Interest Income Amortization

Jan. 1 2022
Dec. 31 2022 240,000 189,618 50,382
Dec. 31 2023 240,000 186,595 53,405
Dec. 31 2024 240,000 183,487 56,513

2022
Dec. 31 Cash 240,000
Interest income 240,000
To record received interest.

Unearned interest income 50,382

Interest income 50,382
To record interest income.

2023
Dec. 31 Cash 240,000
Interest income 240,000
To record received interest.

Unearned interest income 53,405

Interest income 53,405
To record interest income.
 2024
Dec. 31 Cash 240,000
Interest income 240,000
To record received interest.

Unearned interest income 56,513

Interest income 56,513
To record interest income.

Cash 3,000,000
Loan Receivable 3,000,000
To record received cash from loan receivable.
Carrying Amount
3,160,300
3,109,918
3,056,513
3,000,000
Required:
1. Determine the carrying amount of the loan on January 1, 2022.
Principal amount 5,000,000
Direct origination cost incurred 457,500
Origination fee received from the customer 200,000

Principal amount 5,000,000

Direct origination cost incurred 457,500
Origination fee received from the customer (200,000)
Initial carrying amount of loan 5,257,500

2. Prepare a table of amortization of the direct origination cost.

Date Interest Received Interest Income Amortization
Jan. 1 2022
Dec. 31 2022 500,000 420,600 79,400
Dec. 31 2023 500,000 414,248 85,752
Dec. 31 2024 500,000 407,652 92,348

3. Prepare journal entries for 2022, 2023, and 2024.

2022
Jan. 1 Loan Receivable 5,000,000
Cash 5,000,000
To record loan.

Unearned interest income 457,500

Cash 457,500
To record direct origination cost incurred.

Cash 200,000
Unearned interest income 200,000
To record received origination fee.

2022
Dec. 31 Cash 500,000
Interest income 500,000
To record received interest.

Unearned interest income 79,400

Interest income 79,400
To record interest income.

2023
Dec. 31 Cash 500,000
Interest income 500,000
To record received interest.

Unearned interest income 85,752

 Interest income 85,752
To record interest income.

2024
Dec. 31 Cash 500,000
Interest income 500,000
To record received interest.

Unearned interest income 92,348

Interest income 92,348
To record interest income.

Cash 5,000,000
Loan Receivable 5,000,000
To record received cash from loan receivable.
Carrying Amount
5,257,500
5,178,100
5,092,348
5,000,000
Required:
1. Compute the impairment loss on the loan receivable.
Expected principal payments
December 31, 2025 930,000
December 31, 2026 1,720,000
December 31, 2027 2,370,000
Total Present Value of Cash Flow 5,020,000

Loan Receivable - December 31, 2023 6,000,000

Accrued Interest 480,000
Total Carrying Amount 6,480,000

Carrying amount of loan 6,480,000

Present value of cash flow 5,020,000
Impairment Loss 1,460,000

2. Prepare journal entries for 2024, 2025, and 2026.

2024
Dec. 31 Loan impairment loss 1,460,000
Accrued interest receivable 480,000
Allowance for loan impairment 980,000
To record impairment loss.

Loan receivable 6,000,000

Allowance for loan impairment (980,000)
Carrying amount 5,020,000

2025
Dec. 31 Cash 1,000,000
Loan receivable 1,000,000
To record cash collection.

Allowance for loan impairment 401,600

Interest income 401,600
To record interest income.

2026
Dec. 31 Cash 2,000,000
Loan receivable 2,000,000
To record cash collection.

Allowance for loan impairment 353,728

Interest income 353,728
To record interest income.

Loan receivable - Dec. 31, 2025 5,000,000

Allowance for loan impairment (578,400)
Carrying amount - Dec. 31, 2025 4,421,600

Interest income for 2026 353,728