A federal agency was established to provide loan guarantees for students. At the beginning of Year 1 the agency guarantees $100,000 of student loans. The payments that the agency estimates it will have to make to lenders as a result of student defaults are as listed below. The agency uses a discount rate of 6 percent.
REQUIRED:
Prepare the necessary journal entries to record the loan guarantee expense in Year 1 and the payment to the lenders in Year 2 of $400 on defaulted loans. If no entry is required, write "No entry required."

Question

A federal agency was established to provide loan guarantees for students. At the beginning of Year 1 the agency guarantees $100,000 of student loans. The payments that the agency estimates it will have to make to lenders as a result of student defaults are as listed below. The agency uses a discount rate of 6 percent.
REQUIRED: 
Prepare the necessary journal entries to record the loan guarantee expense in Year 1 and the payment to the lenders in Year 2 of $400 on defaulted loans. If no entry is required, write "No entry required."

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The Answer of A federal agency was established to provide loan guarantees for students. At the beginning of Year 1 the agency guarantees $100,000 of student loans. The payments that the agency estimates it will have to make to lenders as a result of student defaults are as listed below. The agency uses a discount rate of 6 percent.
REQUIRED: 
Prepare the necessary journal entries to record the loan guarantee expense in Year 1 and the payment to the lenders in Year 2 of $400 on defaulted loans. If no entry is required, write "No entry required."

A Federal Agency Was Established to Provide Loan Guarantees for Students