Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $29,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $3,480 this year if the interest rate on the loan had been set at the prevailing federal interest rate.

Required:

1. Wally used the funds as a down payment on a speedboat and repaid the $29,000 loan (including $290 of interest) at year-end.

   a-1. Does this loan result in any income to either party?

   a-2. Indicate the amount below.

2. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year?

anufacturing company, each of the following items would be considered nonoperating income for income statement purposes except Income from imvestments. Cost of goods sold Interest expense. Gain on sale of imvestments