On December 31, 2018, Jackson Company borrowed $62,092 from Rodgers Bank by signing a 5- year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. However, in 2020, Jackson Company had financial difficulty. As a result, at December 31, 2020, Rodgers Bank determined that is was probable that it would receive only $75,000 at note maturity. The market rate of interest on loans of this nature is now 11%. Rodgers Bank uses the effective-interest method to amortize discounts and/or premiums.

At 10% Present value of 1 for 3 periods .75132 Present value of 1 for 5 periods .62092

At 11% .73119 .59345

What is the amount of impairment loss, if any, to be recorded by Rodgers Bank on December 31, 2020?

1. $0.

2. $54,839.

3. $56,349.

4. $75,131.

5. $18,782.

6. $20,292.

+ why do I need to use 10% of the interest rate instead of 11% in this problem?

Answer rating: 100% (QA)

Answer The correct Answer is 18782 Explanations Impairment Loss to be recorded by Rodgers boing on ... View the full answer