Problem
The Watcher Bank loaned P10,000,000 to a borrower on January 1, 2022. The terms of the loan require principal payments of P2,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment is due on December 31, 2022. The borrower made the required payments on December 31, 2022 and December 31, 2023. However, during 2024 the borrower began to experience financial difficulties, requiring the bank to reassess the collectability of the loan.
On December 31, 2024, the bank has determined that the remaining principal payments will be collected but the collection of the interest is unlikely. The bank has accrued the interest for 2024. The principal payments are expected to be P1,000,000 on December 31, 2025, P2,000,000 on December 31, 2026 and P3,000,000 on December 31, 2027. Round off present value factor to two (2) decimal places (e.g., 2.67)
Task
A. Compute for the impairment loss recognized on December 31, 2024.
B. How much was the interest income on 2025?
C. How much was the carrying amount of the loan on December 31, 2025?
D. How much was the interest income on 2026?