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Hi.
I wonder why the answer for question number 1 is B.
I thought the answer would be C.The notes explains that i should include $28800 in current assets.
I thought I shouldn’t because $288000 is first loaned to an employee, which is deducted from the assets and, and then repaid to the company, which is added to the assets. shouldn’t it become 0 (-288000+288000) in the end of the year? and what company makes is only 0.02×288000, which is the interest?Certainly when the loan was given, the cash would have fallen.
However the question does not ask what figure will appear for cash (and it would be impossible to know in this question). It asks what figure will appear in respect of the loan.
(In a similar what, when insurance was paid, the cash will have fallen, but that is not relevant for part (2) of the question either.)
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