On January 1 2014, June company loaned July company amounting to 2,000,000 and received a two year, 6% , 2,000,000 note. The note calls for annual interest tp be paid each December 31. June collected the 2014 interest on schedule. Howere, on dec 31 2015, based on the July company's recent financial difficulties, June expected that the 2015 interest which was recorded in the books, will not be collected and that only 1,200,000 of the principal will be recovered. The 1,200,000 principal among is expected to be collected in 2 equal installments on dec 31 2017 and December 31 2019. The prevailing interest rate dir similar type of not as of December 31 2015 is 8%

Based on the above informatuin answer the following ( round off present value factors to 4 decimal places)

1.) The present value of the expected future cash flows as of December 31, 2015
2.) The loan impairment loss in 2015
3.) How much is the interest income for the year 2016?
4.) Carrying amoubt of loan as of December 31 2017


Can you please show the solutions since I really don't understand this problem. Thank you so much :)

I don't do model answers

Using dates as names can cause confusion. Ignore the names of the companys

present value of a cash flow is a spreadsheet formula, look it up in the help section
If an asset cannot be realised at full value the value must be written down you can calculate the difference. In this case there are two components to the loss
Interest is a simple calculation assuming the company has agreed to a lesser principal it is calculated in the usual manner
you can calculate the value of the loan at a given date; principal less instalments, etc and a present value is a method of valuation

If you don't understand the problem it maybe your technique, highlight or underline the important information. Prepare a table so you can see the data differently. Above all attempt the problem, if you make a mistake you will be able to undertand why

Okay thank you so much