Kaplan Bank loaned P5,500,000 to Avi Incorporation on January 1, 2015. The initial loan repayment terms include a 10 % interest plus annual principal payments of P1,100,000 on December 31 each year. Avi made the require interest payment in 2015 but did not make the P1,100,000 principal payment for 2015 and 2016 nor the P550,000 interest payment for 2016. Avi is having financial difficulty, and Kaplan has concluded that the loan is impaired. Analysis of Avi\’s financial condition on December 31, 2016, indicates the principal payments will be collected, but the collection of interest is unlikely. Kaplan did not accrue the interest on December 31, 2016. The projected cash flows are as follows:December 31, 2017 P1,750,000December 31, 2018 2,000,000December 31, 2019 1, 750,000Total 5,500,000 1. What is the loan impairment loss on December 31, 2016?2.What is the interest income to be reported by Kaplan Bank in 2017?
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