Final answer:
The General Manager's loan from the hotel is recorded as a loan receivable or note receivable under the assets category on the hotel's balance sheet.
Step-by-step explanation:
When a General Manager of a hotel receives a loan from the hotel that is to be repaid in 5 years, this transaction is recorded on the hotel’s balance sheet as a loan receivable or note receivable under the assets category. It is considered an asset because, much like Singleton Bank’s loan to Hank's Auto Supply, the hotel’s loan to the General Manager will generate interest income over the period until repayment. The balance sheet will reflect this loan as an increase in assets, specifically under current assets if it is to be repaid within a year, or under long-term assets if the repayment period exceeds one year. This classification depends on the specific terms of the repayment schedule set out in the loan agreement.
As demonstrated in the scenario with Singleton Bank, when a bank issues a loan, it records the loan as an asset; the same principle applies to the hotel scenario. For Singleton Bank, the cashier's check issued is deposited by Hank into his checking account at First National, leading to an increase in deposits and reserves at First National. However, Singleton Bank must also maintain a portion of the deposits as required reserves, dictated by the reserve requirement ratio, which is also applicable to the hotel scenario for managing its financials.
In the hotel's case, the loan to the General Manager is on the balance sheet and will affect both the assets side, through interest generation, and the liabilities side once the loan is repaid in full. Just as with the Singleton Bank example, the hotel must manage its assets and liabilities effectively to maintain solid financial standing.