Last Ltd is a manufacturing company that makes loans to other parties from time to time. The
Question:
Last Ltd is a manufacturing company that makes loans to other parties from time to time. The loan
assets are classified by Last Ltd as subsequently measured at amortised cost. Last Ltd does not
apply the simplified approach to impairment of loans receivable. In accounting for impairment
losses, Last Ltd classifies all loans as remaining at stage 1 from inception to maturity. On 1 July
2019, Last Ltd made the following loans:
(a) A 3-year loan of $1 million to Grate Ltd at an interest rate of 15% p.a. due annually in arrears
on 30 June each year. Last Ltd incurred transaction costs of $97 749 in respect of this loan to
arrange charges for security. Last Ltd estimates 12-months expected credit loss as $20 000.
(b) A 3-year loan of $1 million to American Ltd at an interest rate of 10% p.a. with interest due only
on settlement at 30 June 2022. Last Led estimates 12-months expected credit loss as $10 000.
Required
Prepare the entries of Last Ltd to account for the three loans from initial recognition on 1 July 2019
to derecognition on 30 June 2022, assuming loans are fully paid on maturity
South Western Federal Taxation 2017 Comprehensive
ISBN: 9781305874169
40th Edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young