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Sunshine Incorporated provides solar energy services to Toronto. Sunshine needed to buy additional solar energy panels to meet the demand for its energy product. The

Sunshine Incorporated provides solar energy services to Toronto. Sunshine needed to buy additional
solar energy panels to meet the demand for its energy product. The Government of Ontario offered an
interest-free forgivable loan to Sunshine in the amount of $500,000. The loan will be forgiven if
Sunshine is able to produce a stated number of kilowatts of energy per year for the next five years. If
these conditions are not met, the amount is due to the government in full in five years. Sunshine
believes it will be able to meet the conditions. Sunshine recently obtained a similar loan from the bank
with an annual interest rate of 12%.
(a)
Discuss the financial reporting issues related to obtaining the interest-free loan from the government of
Ontario.
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