NOTES & LOANS RECEIVABLE

On January 1, 2024, GG Vibes Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 2024 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%.

1. 1. On January 1, 2024, what is the carrying amount of the note receivable?

(round off PV of an ordinary annuity of 1 to 2 decimal places)

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

On January 1, 2024, GG Vibes Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 2024 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%.

1. 2. How much is the interest income in 2024?

(round off PV of an ordinary annuity of 1 to 2 decimal places)

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

On January 1, 2024, GG Vibes Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 2024 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%.

1. 3. How much is the carrying amount of the receivable on December 31, 2025?

(round off PV of an ordinary annuity of 1 to 2 decimal places)

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

Moderate Bank granted a loan to a borrower on January 1, 2024. The interest on the loan is 10% payable annually starting December 31, 2024. The loan matures in three years on December 31, 2026.

Principal amount ₱5,000,000

Direct origination cost incurred ₱100,000

Indirect origination cost incurred ₱50,000

Origination fee received from the borrower ₱340,000

After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%.

1. What is the carrying amount of the loan receivable on January 1, 2024?

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

Moderate Bank granted a loan to a borrower on January 1, 2024. The interest on the loan is 10% payable annually starting December 31, 2024. The loan matures in three years on December 31, 2026.

Principal amount ₱5,000,000

Direct origination cost incurred ₱100,000

Indirect origination cost incurred ₱50,000

Origination fee received from the borrower ₱340,000

After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%.

2. What is the interest income for 2024?

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

Moderate Bank granted a loan to a borrower on January 1, 2024. The interest on the loan is 10% payable annually starting December 31, 2024. The loan matures in three years on December 31, 2026.

Principal amount ₱5,000,000

Direct origination cost incurred ₱100,000

Indirect origination cost incurred ₱50,000

Origination fee received from the borrower ₱340,000

After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%.

3. 3. What is the carrying amount of the loan receivable on December 31, 2025?

NOTE: (answer must all be numbers, no comma, no decimals and no peso sign)

Present value is

• the value now of a future amount.

• the amount that must be invested now to produce a known future value.

• always smaller than the future value.

• all of these.

   

A promissory note

• is not a formal credit instrument

• may be used to settle an accounts receivable

• has the party to whom the money is due as the maker

• cannot be factored to another party

When a note receivable is dishonored,

• interest revenue is never recorded

• bad debts expense is recorded

• the maturity value of the note is written off

• Accounts Receivable is debited if eventual collection is expected

A company that receives an interest-bearing note receivable will

• debit Notes Receivable for the maturity value of the note

• credit Notes Receivable for the maturity value of the note

• debit Notes Receivable for the face value of the note

• credit Notes Receivable for the face value of the note