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Originally posted by FissionSurplus
I think the other posters have gotten it. The initial deal with the shirt is simply fluff to confuse the issue.
The bottom line is, you borrowed 100. You paid them back 2. You still owe them 98. You paid 97 for the shirt, and kept one for yourself. That makes 98, just what you owe.
The riddle involves the phenomenon of 'suspension of disbelief' inherent in storytelling and its power over the human imagination. If one were to make the story a bit more complex and compelling the illusion is almost guaranteed to work in the moment of its telling and can be a good illustration for the explanation of the anomaly, although not a perfect one because there is an explanation. The more points added to the story cause the listener to pause and try to compute what each element may signify.
There are infinitely many variations to the riddle.