City National Bank signed a loan agreement with State Electric Supply Company on January $2,$

The loan had the following terms:

In connection with this transaction, City National Bank incurred the following costs:

Costs

Fees paid for loan Processing

Employee Bonus

Advertising Costs

Preparation of loan docs.

Amount Paid

$$5,000(0\mathrm{.}5\%of$ balance $)$

$$10,000(1\mathrm{.}0\%of$ balance $)$

$$3,000$

$$2,000$

City National Bank's loan department manager, James Bean, is unsure how they should account

for these costs and their impact on profitability. Should City National Bank Lending expense the

costs associated with the loan, or can they defer them? If the costs are deferred, when should

they be expensed?

Required:

Prepare a letter to Jim explaining the requirements $-$ for all the transactions. The body of the

letter should follow the FIRAC format:

Facts

Issues

Research

Analysis

Conclusion

James Bean's address is $123$ Third Avenue, Huntington, WV $25702.$ Utilize your May and May

text for guidance on the letter style. Your writing is important here. James is not an accountant.

In addition, your research must include appropriate citations from the FASB Accounting

Standards Codification $($ASC$).$ Failure to provide ASC citations will result in a ZERO for the

assignment. You may only use your textbook $($for guidance $-$ do not cite$)$ and the ASC to locate

your answers $-$ NO GOOGLE.