Which of the Following Is Recommended If You Loan Money

question 56

Multiple Choice

Which of the following is recommended if you loan money to a friend or relative?

• A)Charge interest at a rate comparable to any high-risk security.
• B)Always consider offering cash as a gift instead of extending a loan.
• C)Put the agreement in writing.
• D)Ensure that the loan is due within one year or less.
• E)Make informal transactions for friends and relatives.

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Definitions:

Other Comprehensive Income

Revenues, expenses, gains, and losses not included in net income, but affecting shareholders' equity, like foreign currency translation adjustments.

Exposure Draft

A document issued by accounting or regulatory bodies for public comment, outlining proposed changes to accounting standards.

Contractual Cash Flows

The cash flows that are specified within the terms of a contract, especially important in the context of financial instruments.

Amortized Cost

The accounting method of gradually reducing the cost value of an intangible asset through periodic charges to expense.