Question: In 2017, Congress established a small business direct loan program. The program provides that qualifying businesses can obtain loans at a rate 5 percent below

In 2017, Congress established a small business direct loan program. The program provides that qualifying businesses can obtain loans at a rate 5 percent below that prevailing on Treasury securities of comparable maturity. The program was to be in effect for a period of 12 years. Its total cost was estimated at $1.3 billion. In 2018, the Small Business Administration, which administers the program, loaned the S & D Produce Company $100,000 for 10 years at a rate of 5 percent. At the time, the prevailing Treasury rate was 10 percent. The loan was to be repaid in 10 annual installments of $12,950.
1. What journal entry, if any, should the Small Business Administration make in 2017 when Congress authorized the program? Explain and justify your response.
2. What journal entry should it make in 2018 when it loaned the S & D Produce Company $100,000? Explain and justify your response.
3. What journal entries should it make in 2019 and 2020 on collection of the first two loan repayments?

Step by Step Solution

★★★★★

3.52 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

1 At the time Congress authorizes the program the Small Business Administration need recognize neith... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1113-B-A-F(245).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

In 2014, Congress established a small business direct loan program. The program provides that qualifying businesses can obtain loans at a rate 5 percent below that prevailing on Treasury securities...

Select the best answer. 1. Military hardware should be accounted for as a. Stewardship assets b. Heritage assets c. National defense assets d. General assets 2. The Executive Ofce Building has...

Suzanne is married and the sole owner of Laidlaw Corporation. When the corporation was established in 2006, she received 10,000 shares of qualified small business stock in exchange for her $100,000...

When should the costs of subsidized loan programs be recognized? In 20X0, Congress established a small business direct loan program. The program provides that qualifying businesses can obtain loans...

In 20X0, Congress established a small business direct loan program. The program provides that qualifying businesses can obtain loans at a rate 5 percent below that prevailing on Treasury securities...

With $2.3 Trillion Injection, Feds Plan Far Exceeds Its 2008 Rescue The Federal Reserve said it would buy some municipal bonds and some riskier debt to help governments and companies. The Federal...

Instructions: Please read the article and write SUMMARY of the article. What is main idea of the article? " With $2.3 Trillion Injection, Fed's Plan Far Exceeds Its 2008 Rescue " The Federal Reserve...

Read this short article below and then follow the instructions below. Instructions: Write one short 6-line paragraph SUMMARY of the article Then a second 6-line paragraph describing the lecture topic...

Use the financial statements attached to answer (short answers) the following questions (for the city of Richmond, VA) 1. How does the audit opinion given to this city by its independent auditors...

Part I: Answer each question thoroughly, read over each problem, discuss the pros and cons of each option, and select the best option including your justification and your own opinion. H & I Advanced...

Deela Fashion in New York operates three departments: Men's, Women's, and Accessories. Deela Fashion allocates all fixed expenses (unavoidable building depreciation and utilities) based on each...

Hypothesis Test for lightning Deaths Refer to the sample data given in Cumulative Review Exercise 1 and consider those data to be a random sample of annual lightning deaths from recent years. Use...

1 ) Antonia is switching her mortgage payments from monthly to accelerated weekly, making payments every Friday on her payday. Switching to an accelerated weekly payment schedule results in _ _ _ _ _...

Arrow up or down: An excess supply of a product will cause the price to __________. As a consequence of the price change, the quantity demanded will __________, and the quantity supplied will...

The data that follow were taken from the CAFR of Chaseville, a mid-sized midwestern city with a population of 82,000. All dollar amounts are in thousands. Total assessed value of property .......

A town's library system is a legally constituted government entity. It is governed by a ten-person board. Six of the members are appointed by the town's council; the other four are selected by the...

The statements, schedules, tables, and other types of data that follow are found in the annual report of a typical municipality. For each of these items indicate whether it would be found in the: ...

The following data come from the 2018 ANES, pid14 and warmyou , both recoded into 3 categories. One question asked about party identification. The other asked about the importance of climate change....

Question 10 0.3 pts What is the profitability index of a project that costs $75,000 and returns $25,000 annually for five years if you use an opportunity cost of capital (i.e., discount rate) of 10%?...

1. A store has 5 years remaining on its lease in a mall. Rent is $1,900 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year...