Liabilities Week 2

Question 1

An employee’s paycheck will be: Gross Wages Earned - Deductions = Net pay. This will be the amount recorded for wages payable.

T/F

Answer 1

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.

Question 2

They are an employee? is not true of a guaranteed payment to a partner in a partnership business ?

Answer 2

They are not considered an employee

Question 3

A legal claim on an asset used as collateral in satisfying a debt is called a:

Answer 3

Lien

Question 4

The process of systematically repaying a loan over time is referred to as:

Answer 4

Amortization

Question 5

A loan used to finance a company’s daily operations is called a(n):

Answer 5

Working Capital Loan

Question 6

Owner’s equity is calculated by:

Answer 6

Adding up all of the business assets and deducting all of its liabilities.

Question 7

If a company has $80,000 in total assets and $40,000 in liabilities, the owner’s equity is ______.

Answer 7

40,000

Question 8

You record an owner’s draw by _____ the Owner’s Draw Account and _____ the Cash Account.

Answer 8

debiting; crediting

Question 9

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?

Answer 9

Crediting $8,000 to the Owner Withdrawals account.

Question 10

Which of the following best defines a Lien?

Answer 10

A legal claim on an asset used as collateral in satisfying a debt

Question 11

True or False: An Unsecured Loan is a loan in which the borrower has pledged collateral as part of the loan agreement.

Answer 11

False

Question 12

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)

Answer 12

8,252.52

Question 13

On the balance sheet, a note payable will appear as a(n):

Answer 13

Long-term Liability

Question 14

Which of the following best describes the term Owner’s Draw?

Answer 14

Decreases in equity from owner’s withdrawals.

Question 15

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)

Answer 15

11,223.76

Question 16

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?

Answer 16

Debit Owner’s Draw $2,000

Credit Cash Account $2,000

Question 17

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)

Answer 17

9,159.95

Question 18

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

Answer 18

Partnership

Question 19

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?

Answer 19

Debit Cash $5,000 and credit Loans Payable $5,000

Question 20

Which of the following best describes a company with the following attributes?

Answer 20

Sole Proprietorship

Question 21

A loan in which the borrower has pledged some asset as collateral is known as a(n):

Answer 21

Secured Loan

Question 22

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.

Answer 22

True

Question 23

Which of the following is the correct accounting equation to use when determining equity?

Answer 23

Assets - Liabilities = Equity

Question 24

The percentage of the existing principal loan balance that the borrower must pay the lender for borrowing the money is referred to as the:

Answer 24

Interest rate

Question 25

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)

Answer 25

44,000

Question 26

The multi-column chart listing each payment required during the loan period is called a:

Answer 26

Loan Amortization Schedule

Question 27

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?

Answer 27

The total amount due on the loan over the next twelve months

Question 28

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.

Answer 28

True

Question 29

Which best defines amortization?

Answer 29

The systematic process of repaying a loan over time