Suppose that Jim just got a $20,000 loan from his credit union to buy a new car. The loan is a _____ for Jim and a _____ for the credit union.

Question

Quizplus · Accepted Answer

The loan is a liability for Jim because he now owes the credit union $20,000, which he will need to pay back with interest over time. On the other hand, the loan is a financial asset for the credit union, as it represents an expected stream of future cash inflows (i.e. loan payments and interest) that will benefit the credit union's financial position. Therefore, the best choice is D - liability for Jim, and financial asset for the credit union.

Suppose That Jim Just Got a $20,000 Loan from His