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same day, Dura-Craft also paid the balance of its corporate loan
by issuing a check to the Plan for $87,185 with the notation
"princ $50,000, int $37,185". Dura-Craft's check register for
the $87,185 check to the Plan bears the notation "Loan Payback
from Milo-Dave-pd directly to Dura-Craft profit Share Trust."
Springbrook recorded the payment on its accounting records
as follows:
Wage expense $10,000
Interest expense 18,315
Loan payment 15,000
Paid to profit-sharing plan 43,315
At the time of the payment, Springbrook's accounting records
reflected a loan payable balance of $33,315. Springbrook
computed and paid interest to the Plan on the full amount of its
corporate loan despite the $10,000 loan payment which Springbrook
made to Milo Chapman in 1985. Accordingly, as of the date of its
payment, Springbrook owed to Milo Chapman and David Christie a
total of $14,000 in interest rather than the $18,315 which was
paid.
Dura-Craft recorded the $87,185 repayment on the same date
in its accounting records as follows:
Wage expense $10,000
Interest expense 37,185
Loan payment 40,000
Paid to profit-sharing trust 87,185
At the time of the payment, Dura-Craft's accounting records
reflected a remaining loan payable balance of $40,000.
Nonetheless, Dura-Craft computed the interest owed based upon an
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Last modified: May 25, 2011