In the world of financial fraud, a Ponzi scheme is famous. Here is the story behind
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1. Assume that on December 27, 1919, Ponzi’s first three lenders provided his company with $ 5,000 each. Use the basic accounting equation to show the effects of these transactions on December 27, 1919.
2. If the first two lenders are repaid their original loan amounts plus the 50 percent interest promised to them, how much cash is left in Ponzi’s business to repay the third lender? Given what you discovered, how was it possible for Ponzi’s company to remain in “business” for over eight months?
3. Who was harmed by Ponzi’s scheme?
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Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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