Question

On December 31, 2020, Teal Company signed a $1,022,000 note to Flint Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Teal’s financial situation worsened. On December 31, 2022, Flint Bank determined that it was probable that the company would pay back only $613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,022,000 loan.

(a)

Correct answer iconYour answer is correct.

Determine the amount of cash Teal 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.)

946455

Attempts: 1 of 3 used

(b)

• Your Answer
• Correct Answer

Partially correct answer iconYour answer is partially correct.

Prepare a note amortization schedule for Flint 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

  

Attempts: 3 of 3 used

(c)

Incorrect answer iconYour answer is incorrect.

Determine the loss on impairment that Flint 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

I just need C answered

Answer 1

Answer:

Part C

Loss due to impairment:

Carrying amount of loan (12/31/19).... 972,049
Less: Present value of $600,000 due in 3 years ($613,200 *pvif(11%,3yrs) 0.73119) = 448,366

Present value of $91,980 payable annuallyfor 3 years ($91,980 *pvifa(11%,3yrs) 2.44371) = 224,772

Loss due to impairment = $298,911

Working Note :

Part A:

Cash received by Flint Company on December 31, 2020:

Present value of principal ($1,022,000 * pvif(11%,5yrs) 0.59345) = 606,506

Present value of interest ($(1,022,000*9%) * pvifa(11%,5yrs) 3.69590) = 339,949

Cash received = 946,455

Part B:

Note Amortization Schedule

(Before Impairment)

Date	cash received (9%)	intereste revenue (11%)	carrying amount
December 31, 2020			946,455
December 31, 2021	91,980 (1022000*9%)	104,110 (946,455*11%)	958,585 (946,455+(104,110-91,980))
December 31, 2022	91,980 (1022000*9%)	105,444	972,049 (958,585+(105,444-91,980))