(Answered) Question - on 1 jan 2018 entity a makes a four-year loan of

Accounting

Question - On 1 Jan 2018, Entity A makes a four-year loan of $10,000 to Entity B. The fixed interest on the loan is 6%, the same as the effective rate of interest. Interest is received at the end of each year.

On 1 Jan 2021, Entity B tells Entity A that it is in significant financial difficulties. At this time the current market interest rate is 8%.

Entity A estimates that it will receive no more interest from Entity B. It also estimates that only $6,000 of the loan will be repaid on the redemption date.

REQUIRED - If the four-year loan is measured at amortised cost, evaluate the interest income of the four-year loan which recognized in the Statement of Profit or Loss for the year of 2021.

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