Question

Perry National Bank has a note receivable of $200,000 from Mogren Company that it is carrying at face value and is due on December 31, 2020. Interest on the note is payable at 9% each December 31. Mogren paid the interest due on December 31, 2016, but informed the bank that it would probably miss the next 2 years’ interest payments because of its financial difficulties. After that, it expected to resume its annual interest payments, but it would make the principal payment one year late, with interest paid for that additional year at the time of the principal payment.

Required:

1.	Compute the value of the impaired loan on December 31, 2016.
2.	Prepare the journal entries from 2016 to 2021 for the bank to record the above events.

CHART OF ACCOUNTS
Perry National Bank
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 141 Inventory 152 Prepaid Insurance 165 Allowance for Doubtful Notes 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 431 Interest Income EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

Prepare the journal entries from 2016 to 2021 for the bank to record the events. Additional Instructions

PAGE 2016PAGE 2017PAGE 2018PAGE 2019PAGE 2020PAGE 2021 (!!!!!!PLEASE FILL PAGES 2016, 2017, 2018, 2019,2020, AND 2021!!!!!!!!!!!!!!!!)

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

Compute the value of the impaired loan on December 31, 2016. Additional Instructions

Answer 1

Date	Particulars	Debit	Credit
1	Value of impaired loan on 31 dec 2016	200000
2
31-Dec-16	Cash	18000
	Interest revenue		18000
	(200000*9%)
31-Dec-17	Interest receivable	18000
	Interest revenue		18000
31-Dec-18	Notes receivable	36000
	Interest receivable		18000
	Interest revenue		18000
	(interest for 2 years added to impaired loan)
31-Dec-19	Cash	19620
	Interest revenue		19620
	(218000*9%)
31-Dec-20	Cash	19620
	Interest revenue		19620
	(218000*9%)
31-Dec-21	Cash	237620
	Interest revenue		19620
	Notes receivable		218000