Question

# On December 31, 2020, Splish Company signed a \$1,196,300 note to Blossom Bank. The market interest...

On December 31, 2020, Splish Company signed a \$1,196,300 note to Blossom Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Splish’s financial situation worsened. On December 31, 2022, Blossom Bank determined that it was probable that the company would pay back only \$717,780 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the \$1,196,300 loan.

Determine the amount of cash Splish received from the loan on December 31, 2020. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to 0 decimal places, e.g. 5,275.)

 Amount of cash Splish received from the loan \$enter a dollar amount of cash Splish received from the loan

eTextbook and Media

Prepare a note amortization schedule for Blossom Bank up to December 31, 2022. (Round answers to 0 decimal places, e.g. 5,275.)

Note Amortization Schedule
(Before Impairment)

Date

Cash

Interest
Revenue

Increase in
Carrying
Amount

Carrying
Amount of
Note

12/31/20

\$enter a dollar amount

12/31/21

\$enter a dollar amount \$enter a dollar amount \$enter a dollar amount enter a dollar amount

12/31/22

enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount

eTextbook and Media

Determine the loss on impairment that Blossom Bank should recognize on December 31, 2022. (Round present value factors to 5 decimal places, e.g. 0.52500 and final answer to 0 decimal places, e.g. 5,275.)

 Loss due to impairment \$enter the Loss due to impairment in dollars

 Computation of cash received by Blossom company on December 2020 Present value of principle (\$1196300*PVF,.12,5 years) (\$1,196,300*0.56743) = \$678816.5 Present vale of interest (\$1196300 * PVAF ,0.12,5years) (\$119630*3.60478) = \$431239.8 Cash received = 678816.5+ 431239.8 = 1110056 Interest = 10% of 1,196300 =\$119630 Part b Note Amortization Schedule (Before impairment) Date Cash received Interest revenue Increase in carrying amount Carrying amount of note 10% 12% 12/31/2020 1110056 12/31/2021 119630 133206.7 13576.72 1096479.3 12/31/2022 119630 131577.5 11947.51 1084531.8