Sarduchi Imports owes Radnor S&L $50 million under an 8% note with three years remaining to maturity. Due to financial difficulties of Sarduchi, the previous year's interest ($4 million) was not received. Radnor believes it is probable that Sarduchi will default on the note, and that the present value of all amounts it eventually will collect is $25 million.

Required: Compute the impairment loss that the bank would record.

Question

Required: Compute the impairment loss that the bank would record.

Quizplus · Accepted Answer

The Answer of Sarduchi Imports owes Radnor S&L $50 million under an 8% note with three years remaining to maturity. Due to financial difficulties of Sarduchi, the previous year's interest ($4 million) was not received. Radnor believes it is probable that Sarduchi will default on the note, and that the present value of all amounts it eventually will collect is $25 million.

Required: Compute the impairment loss that the bank would record.

Sarduchi Imports Owes Radnor S&L $50 Million Under an 8