Answer
The present value of cash flows that are expected from Toni Braxton (principal amount and respective interest) should be deducted from the principal amount of the loan advanced to Toni Braxton. The resulting figure is the impairment amount that should be recorded. The discounting of the amounts expected should be based on the effective interest rate that has been charged on the loan historically.
Work Step by Step
The present value of cash flows that are expected from Toni Braxton (principal amount and respective interest) should be deducted from the principal amount of the loan advanced to Toni Braxton. The resulting figure is the impairment amount that should be recorded. The discounting of the amounts expected should be based on the effective interest rate that has been charged on the loan historically.
