Question

John Hamilton narrowed $500.000 from stone creek bank to open a new restaurant called sauce it up. John transferred $450,000 of the cash he narrowed to the restaurant the first day of the year. How many reporting entities exist in this scenario?A- one reporting entityB- two reporting entitiesC- three reporting entitiesD- four reporting entities

Answer 1

Answer:

C) three reporting entities

Explanation:

A reporting entity is the same as an accounting entity, and it refers to a business or individual that must keep ts own accounting records. The entity must engage in separate activities and have separate obligations than other entities.

In this case:

1. the Stone Creek Bank is one entity that borrowed $500,000
2. John Hamilton is another entity because he borrowed money from the bank and is responsible for paying it back
3. Sauce It Up restaurant is another entity that was created by John Hamilton, and received $450,000