Alright, I'm doing a research project for my accounting class. I don't want the complete answer, I just want to be led to the right track. Here is the question:
City National Bank signed a loan agreement with State Electric Supply Company on January 2, 2019. The loan had the following terms:
Principal: $1,000,000
Term: 10- years
Interest rate: 7%
Annual Payment: $142,377.50
Points Received: $20,000
In connection with this transaction, City National Bank incurred the following costs:
Costs
Amount Paid Fees paid for loan Processing $5,000 (0.5% of balance)
Employee Bonus $10,000(1.0% of balance)
Advertising Costs $3,000
Preparation of loan docs. $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?
Cost mentioned above shall firstly be categorized as the type of cost then only it should be booked or deffered.
Preparation of loan documents and advertisement cost should be booked immediately and should not be deffered. Whereas loan Processing fees and cost for preparation of loan documents can be deffered and booked in the manner of repayment of loan.
Alright, I'm doing a research project for my accounting class. I don't want the complete answer,...
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