Question

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 Received		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

Answer 1

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