Liabilities Week 2 Flashcards
An employee’s paycheck will be: Gross Wages Earned - Deductions = Net pay. This will be the amount recorded for wages payable.
T/F
True. The final paycheck for an employee is calculated by gross wages earned, subtracting all deductions (taxes, garnishments, and elected withholdings), which leaves their net pay, or wages payable.
They are an employee? is not true of a guaranteed payment to a partner in a partnership business ?
They are not considered an employee
A legal claim on an asset used as collateral in satisfying a debt is called a:
Lien
The process of systematically repaying a loan over time is referred to as:
Amortization
A loan used to finance a company’s daily operations is called a(n):
Working Capital Loan
Owner’s equity is calculated by:
Adding up all of the business assets and deducting all of its liabilities.
If a company has $80,000 in total assets and $40,000 in liabilities, the owner’s equity is ______.
40,000
You record an owner’s draw by _____ the Owner’s Draw Account and _____ the Cash Account.
debiting; crediting
At the end of a fiscal year, Winston’s Seafood had draws totaling $8,000. What is the first step in closing the draw account for this fiscal period?
Crediting $8,000 to the Owner Withdrawals account.
Which of the following best defines a Lien?
A legal claim on an asset used as collateral in satisfying a debt
True or False: An Unsecured Loan is a loan in which the borrower has pledged collateral as part of the loan agreement.
False
Your client has taken out a 15-year loan of $200,000 at 6% annual interest. Their annual installments are $20,252.52. Using the amortization formula, calculate how much of the annual installment payment is going towards the principal for year 1. (your answer should be in the following format and not include a $ sign: xxxx.xx)
8,252.52
On the balance sheet, a note payable will appear as a(n):
Long-term Liability
Which of the following best describes the term Owner’s Draw?
Decreases in equity from owner’s withdrawals.
Your client has taken out a 20-year loan for $250,000 with a 5% annual interest. Their annual installments are $23,723.76. Using the amortization chart, calculate how much of the annual installment payment is going towards the principal for year 1. (your answer should be in the following format and not include a $ sign: xxxx.xx)
11,223.76
Your client has just withdrawn $2,000 from their equity in the company. The accounts affected are the cash account and the Owner’s Draw account. Which of the following is the correct steps to set up the journal entry for this transaction?
Debit Owner’s Draw $2,000
Credit Cash Account $2,000
Your client has taken out a 15-year loan for $300,000 with a 5% annual interest. Their annual installments are $23,723.76. Using the amortization chart, calculate how much of the annual installment payment is going towards the principal for year 2. (your answer should be in the following format and not include a $ sign: xxxx.xx)
9,159.95
9.
Question 9
Which of the following best describes a company with the following attributes?
Ownership: Two or more partners
Capital Contributions: Partner Equity
Taxes: Self-employed taxes; Personal taxes
Partnership
Your client secured a short-term loan of $5,000. What would be the correct way to record the initial transaction in the general journal?
Debit Cash $5,000 and credit Loans Payable $5,000
Which of the following best describes a company with the following attributes?
Sole Proprietorship
A loan in which the borrower has pledged some asset as collateral is known as a(n):
Secured Loan
True or False.: When a company takes out a loan to purchase a vehicle or equipment, the value of the vehicle or equipment should be listed on the balance sheet as an asset.
True
Which of the following is the correct accounting equation to use when determining equity?
Assets - Liabilities = Equity
The percentage of the existing principal loan balance that the borrower must pay the lender for borrowing the money is referred to as the:
Interest rate
You are working on a balance sheet for your client. Currently, you have a total asset value of $51,500 and a total liability value of $7,500. Using the accounting equation, what would your total equity value be? (type your answer as a whole number without punctuation)
44,000
The multi-column chart listing each payment required during the loan period is called a:
Loan Amortization Schedule
On the balance sheet, if your client splits their loan into long-term liabilities and current liabilities, which of the following would be the value that would be placed in the current liability section?
The total amount due on the loan over the next twelve months
True or False: A mortgage loan generally requires the real estate to serve as collateral, but commercial loans generally may or may not have an asset associated with the loan to put on the books.
True
Which best defines amortization?
The systematic process of repaying a loan over time
