MCP - Loan Receivable

1 Immoderate Bank

(1) Principal amount 5,000,000

Direct origination cost 100,000
Origination fee received from borrower (340,000)
Initial carrying amount of loan receivable 4,760,000

Interest
Received Interest Amortization Carrying
(2) Date (10%) income (12%) (discount) amount/PV
1/1/2017 4,760,000
12/31/2017 500,000 571,200 71,200 4,831,200
#2 #3

2 Charitable Bank

(1) Principal amount 1,500,000

Direct origination cost 40,000
Origination received from borrower (1,500,000 x 4%) (60,000)
Initial carrying amount of loan receivable 1,480,000

(2) Principal amount 1,500,000

Origination fee paid (60,000)
Initial carrying amount of loan payable 1,440,000

Interest
Received Interest Amortization Carrying
3 Date (12%) income (13.4%) (discount) amount/PV
12/1/2017 1,940,000
1/1/2018 20,000 21,663 1,663 1,941,663
#2 #1

12/31/2017 Accrued interest receivable 20,000

Interest income 20,000

Unearned interest income 1,663

Interestt income 1,663

4 Loan receivable, balance (5,000,000 - 2,000,000) 3,000,000

Add: Accrued interest receivable -
Total receivable 3,000,000
Less: PV of cash flows 2,783,000
Impairment loss 217,000

Total PV of
Date Collection PVF cash flows
1/1/2018 1,000,000 1.000 1,000,000
1/1/2019 1,000,000 0.926 926,000
1/1/2020 1,000,000 0.857 857,000
2,783,000

Interest Carrying
Date Collection income (8%) Principal amount/PV
12/31/2017 2,783,000
1/1/2018 1,000,000 - 1,000,000 1,783,000
12/31/2018 142,640 1,925,640
#2 #3

OR
Loan receivable 3,000,000
Less: Allowance for Loan impairment (217,000)
Carrying amount of loan receivable, 12/31/2017 2,783,000

Loan receivable (3,000,000 - 1,000,000) 2,000,000

Less: Allowance for Loan impairment (217,000 - 142,540) (74,360)
Carrying amount of loan receivable, 12/31/2017 1,925,640

Amortization of loan impairment [(3,000,000 - 1,000,000) - 217,000] x 8%] 142,640

5 Loan receivable, balance 9,000,000
Add: Accrued interest receivable (9,000,000 x 12% x 1yr) 1,080,000
Total receivables 10,080,000
Less: PV of cash flows 6,630,000
Impairment loss 3,450,000

Total PV of
Date Collection PVF cash flows
12/31/2018 1,500,000 0.89 1,335,000
12/31/2019 2,000,000 0.80 1,600,000
12/31/2020 2,500,000 0.71 1,775,000
12/31/2021 3,000,000 0.64 1,920,000
6,630,000

Interest Carrying
Date Collection income (12%) Principal amount/PV
12/31/2017 6,630,000
12/31/2018 1,500,000 795,600 704,400 5,925,600
#2 #3

6 Loan receivables (10,000,000 - 4,000,000) 6,000,000

Add: Accrued interest receivable (6,000,000 x 10% x 1 yr) 600,000
Total receivables 6,600,000
Less: PV of cash flows 5,310,000
Impairment loss 1,290,000

Total PV of
Date Collection PFV cash flows
1/1/2018 1,000,000 1.00 1,000,000
1/1/2019 2,000,000 0.91 1,820,000
1/1/2020 3,000,000 0.83 2,490,000
5,310,000

PV of 1 for one period (1/1.10^1) 0.91

PV of 1 for two periods (1/1.10^2) 0.83

Interest Carrying
2 Date Collection income (10%) Principal amount/PV
12/31/2017 5,310,000
1/1/2018 1,000,000 1,000,000 4,310,000
12/31/2018 431,000 4,741,000
#2 #3

7 Loan receivable, balance 5,000,000

Add: Accrued interest receivable -
Total receivable 5,000,000
Less: PV of cash flows 4,248,000
Impairment loss 752,000

PV of principal (5,000,000 x 0.75) 3,750,000

Add: PV of interest (200,000 x 2.49) 498,000
Total PV of cash flows 4,248,000

Interest Interest Carrying

Date received income Amortization amount/PV
12/31/2017 4,248,000
12/31/2018 200,000 424,800 224,800 4,472,800
#2 #3

8 PV of principal (5,000,000 x .57) 2,850,000

PV of interest (5,000,000 x 10% x 3.60) 1,800,000
Total PV of cash flow 4,650,000 #1

Interest Interest Amortization Carrying

Date received (10%) income (12%) (discount) amount/PV
12/31/2017 4,650,000
12/31/2018 500,000 558,000 58,000 4,708,000
12/31/2019 500,000 564,960 64,960 4,772,960 #2
 PV of principal (3,000,000 x .71) 2,130,000
PV of interest (5,000,000 x 10% x 2.40) 1,200,000
PV of cash flow 3,330,000

Carrying amount, 12/31/2019 4,772,960

PV of cash flow 3,330,000
Impairment loss 1,442,960 #3

9
(1) Carrying amount of loan receivable 3,000,000
PV of cash flows (3,000,000 x 90% x 0.65) 1,755,000
12-month expected credit loss 1,245,000
Multuiply: Probability of default 10%
Required allowance for loan impairment 124,500

In determining the interest income/revenue (Under Stage 1 and 2), the based is Gross carrying
(2) amount or face amount x Original effective interest rate.

Interest income (3,000,000 x 9% x 1 yr ) = 270,000

(3) Carrying amount of loan receivable 3,000,000

PV of cash flows (3,000,000 x 60% x 0.71) 1,278,000
Lifetime expected credit loss 1,722,000
Multuiply: Probability of default 30%
Required allowance for loan impairment 516,600

Allowance for loan impairment

Beg 124,500
Impairment
loss
(squeezed) 392,100
End 516,600
516,600 516,600

(4) Carrying amount of loan receivable 3,000,000

PV of cash flows (3,000,000 x 40% x 0.77) 924,000
Lifetime expected credit loss / Required allowance 2,076,000

Allowance for loan impairment

Beg 516,600
Impairment
loss
(squeezed) 1,559,400
End 2,076,000
2,076,000 2,076,000

Impairment loss 1,559,400

Allowance for loan impairment 240,600
Loan Receivable 1,800,000

OR

Impairment loss 1,559,400

Allowance for loan impairment 1,559,400

Allowance for loan impairment 1,800,000

Loan receivable 1,800,000

Principal amount 3,000,000

Expected to be collected (3,000,000 x 40%) 1,200,000
Reduction of loan receivable 1,800,000

Or
Expected to be collected (3,000,000 x 40%) 1,200,000
Allowance for loan impairment (516,600 - 240,600) 276,000
Carrying amount of loan receivable 924,000

OR
Loan receivable (3,000,000 - 1,800,000) 1,200,000
Less: Allowance for loan impairment (516,600+1,559,400) =
2,076,000 - 1,800,000) 276,000
Carrying amount of loan impairment 924,000
 Interest Interest Carrying
Date received income (9%) Amortization amount/PV
12/31/2021 924,000
12/31/2022 83,160 1,007,160
12/31/2023 90,644 1,097,804
12/31/2024 102,196 1,200,000

In determining the interest income/revenue (Under Stage 3), the based is net carrying amount or
Gross carrying amount less allowance for loan impairment x Original effective interest rate.