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| Subject:
Principles of Accounting I
Category: Miscellaneous Asked by: punkin36-ga List Price: $5.00 |
Posted:
30 Sep 2004 19:44 PDT
Expires: 06 Nov 2004 18:36 PST Question ID: 408685 |
(Introduction to Accounting & Business) Jim Johnson is the owner of Hobo Delivery Service. Recently, Jim paid interest of $5,100 on a personal loan of $50,000 that he used to begin the business. Should Hobo Delivery Service record the interest payment? Explain. |
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| Subject:
Re: Principles of Accounting I
From: dreamboat-ga on 30 Sep 2004 23:11 PDT |
No homework questions please. :) Read the terms and conditions. What do you THINK is the answer, and why? |
| Subject:
Re: Principles of Accounting I
From: punkin36-ga on 01 Oct 2004 04:26 PDT |
I think Jim should record the interest payment, because the owner's resources are limited and he had to use the personal loan to get his business started. |
| Subject:
Re: Principles of Accounting I
From: omnivorous-ga on 02 Oct 2004 06:18 PDT |
Punkin -- You actually don't have enough information to answer this question, as the question's worded a little vaguely. If Jim set the $50,000 up as a loan to the business (a liability), the answer is yes. If Jim used the $50K and put into corporate accounts as stock (equity), the payment would have to come out as a dividend -- not an interest payment. Best regards, O. |
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