Required information [The following information applies to the questions displayed below.] Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $26,000 at the beginning of the year at a simple interest rate of 2 percent. Wally would have paid interest of $6,240 this year if the interest rate on the loan had been set at the prevailing federal interest rate. a. Wally used the funds as a down payment on a speedboat and repaid the $26,000 loan (including $520 of interest) at year-end. Does this loan result in any income to either party? Yes Indicate the amount below. Gross Income Pay More Wally b. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year? Amount to be recognized