Loan Impairment
Response to the following problem:
The Oaks National Bank has a note receivable of $500,000 from the Haldane Company that it is carrying at face value and is due on December 31, 2016. Interest on the note is payable at 6% each December 31. The Haldane Company paid the interest due on December 31, 2010, but informed the bank that it would probably miss the next three years' interest payments because of its financial difficulties. After that, it expected to resume its annual interest payments, but it would make the principal payment two years late, with interest paid for the additional years. On January 1, 2013, the bank received new information and now expected the Haldane Company to pay the interest for 2013 through 2018 on December 31 of each year.
Required
1. Compute the value of the impaired loan on December 31, 2010.
2. Prepare the journal entries from 2010 to 2018 for the bank to record the above loan impairment events.