Question

John Hamilton borrowed $500,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $450,000 of the cash he borrowed to the restaurant on the first day of the year. This statement includes how many reporting entities?

Answer 1

3 reporting entities

Step-by-step explanation:

The above statement includes 3 reporting entities. The reporting entities are

John, Sauce-it-up and Stone Creek bank.

The transaction will be between the above 3 entities named above and it will show

For John,

An increase of his account balance by $500,000 first, then later by $50,000. This as a result him transferring $450,000 to sauce-it-up accounts. This leaves his cash increase at $50,000.

For Sauce-it-up,

An increase in account balance of $450,000 will occur in its account which is as a result of the said amount being transferred to the account by John from the $500,000 he borrowed from Stone creek bank.

For Stone creek bank,

A decrease of $500,000 will reflect in its account being tranfer of the loan to John for the startup of sauce-it-up.

I hope this helps.