2010-04-16_194800_Majoli

2010-04-16_194800_Majoli - ____?____ Note Amortization...

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(Impairments) On December 31, 2010, Iva Majoli Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2012, Majoli began to experience financial difficulty. As a result, at December 31, 2012, Paris Bank determined that it was probable that it would receive back only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. Prepare the entry, if any, to record the impairment of the loan on December 31, 2012, by Paris Bank. (Round answers to zero decimal places, e.g. 50,250.) Bad Debt Expense (Debit) _____?____ Allowance for doubtful accounts (credit)
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Unformatted text preview: ____?____ Note Amortization Schedule (Before Impairment) Date Cash Received (0%) Interest Revenue (10%) Discount Amortized Carrying Amount of Note 12/31/00 $62,092 12/31/01 $0 $6,209 $6,209 68,301 12/31/02 6,830 6,830 75,131 Computation of the impairment loss: Carrying amount of investment (12/31/02) $75,131 Less: Present value of $75,000 due in 3 years at 10% ($75,000 X .75132) 56,349 Loss due to impairment $18,782 The entry to record the loss by Paris Bank is as follows: Bad Debt Expense. .......................................................................... 18,782 Allowance for Doubtful Accounts. ................................... 18,782...
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