The Business Development Corporation (BDC), a federal agency (ctitious), makes loans to high tech companies that satisfy specied criteria The loans are intended to encourage research and development and are made at rates substantially below market In 2014 the BDC made a loan of $100,000 to Interfac...

1 The present value of the three loan payments of 37411 discounted at the prevailing rate ...

The Business Development Corporation (BDC), a federal agency (ctitious), makes loans to high-tech companies that satisfy specied

Question:

The Business Development (BDC), a federal agency (ﬁctitious), makes loans to high-tech companies that satisfy speciﬁed criteria. The loans are intended to encourage research and development and are made at rates substantially below market.
In 2014 the BDC made a loan of $100,000 to Interface Networks, Inc. The interest rate was 6 percent and the loan was payable over a three-year period in equal installments of $37,411. At the time of the loan, prevailing Treasury interest rates for loans of comparable maturities were 10 percent.
1. What was the amount of the loan subsidy?
2. How and when should the agency recognize the value of the subsidy? Explain.
3. Prepare a journal entry to record the loan and recognize the subsidy.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...