The Business Development Corporation (BDC) , a federal agency (fictitious), makes loans to high-tech companies that satisfy

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The Business Development Corporation (BDC) , a federal agency (fictitious), makes loans to high-tech companies that satisfy specified criteria. The loans are intended to encourage research and development and are made a t rates substantially below market.

The BDC made a loan of $100,000 to Interface Networks, Inc. The interest r ate was 6 percent, and the loa n was payable over a three-year period in equal installments of $37,411. At the time of the loan, prevailing Treasury interest rates for loans of comparable maturities were 10 percent.

1. What was the amount of the loan subsidy?
2 . How and when should the agency recognize the value of the subsidy? Explain.
3. Pre pare a journal entry to record the loan and recognize the subsidy.

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Government And Not For Profit Accounting Concepts And Practices

ISBN: 9781119803898

9th Edition

Authors: Michael H. Granof, Saleha B. Khumawala, Thad D. Calabrese

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