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On January 1, 2011, in an effort to lure Tar-Mart, a major discount retail chain to the area, the city of Bordeaux agreed to provide the company with a €6,000,000 three-year, Zero-interest bearing note.The prevailing rate of interest for a loan of this type is 10% and the present value of €6,000,000 at 10% for three years is €4,507,800.
-In recording the loan and grant, Tar-Mart will

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The entries involve debiting Discount on Notes Payable for the difference between the face value and present value, crediting Deferred Grant Revenue for the same amount, and crediting Note Payable for the full face value.

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