liabilities and equity in accounting coursera week 1 quiz answers
Liabilities Overview Practice Quiz
1. The claims against a company's assets are known as what?
- Equity
- Liabilities
- Notes Payable
- Accounts Payable
2. A company’s obligations that will come due within one year are known as what?
- Liabilities
- Current Liabilities
- Non-current Liabilities
- Notes Payable
3. A company’s obligations that won't come due within one year are known as ________.
- Liabilities
- Current Liabilities
- Non-current Liabilities
- Notes Payable
4. The expected balance of a particular account type is known as ___________.
- The expected balance
- The debit balance
- The credit balance
- The normal balance
5. True or False: Liabilities have a normal credit balance.
- True
- False
Additional Current Liabilities Practice Quiz
6. True or False: A $25,000, five-year note for a trailer that requires a monthly payment of $1,000 should go under the asset section of the balance sheet.
- False
- True
7. Why is deferred revenue considered a liability?
- Because it is technically for goods or services still owed to customers.
- Because the price of the good or service may fluctuate.
- Because it is considered an expense until the payment is collected.
8. In the case of a company's deferred revenues, which occurs first?
- Receiving The Money From The Customer
- Earning the revenues
9. When a customer gives you an advance payment:
- You decrease your deferred revenue account. As you deliver goods or services, your deferred revenue account will increase.
- You increase your deferred revenue account. As you deliver goods or services, your deferred revenue account will increase too.
- You increase your deferred revenue account. As you deliver goods or services, your deferred revenue account will decrease.
10. Sal takes out a vendor line of credit of $3,000 for some upgrades to his store. He will then debit ______ for $3,000 and credit his ______ for the same amount.
- Accounts Receivable; Equity
- Accounts Payable; Cash Account
- Cash Account; Accounts Payable
- Cash Account; Accounts Receivable
11. True or False: Current Liabilities are only amounts we owe to suppliers (of merchandise or services) bought on credit.
- True
- False
Liabilities and Equity in Accounting Assessment
12. Liabilities have a normal ________________ balance.
- Debit
- Credit
13. An account with a balance other than what is expected or normal may indicate a(n) __________.
- Deferred Tax
- Embezzlement
- Error
- Deferred Revenue
14. Dale wants to take out a mortgage to purchase a commercial space to expand his business: “Tailor Swift - Quick Alterations and Embroidery Services”. He has found a property, prepared his business proposal, and is going to meet with the bank. He has been working out of his home for years and already has a good client base, lots of equipment, and inventory valued at $50,000 to get his business off the ground in a formal space.
If granted a $100,000 mortgage, how would the accounting equation look to keep his books balanced?
- $100k increase in liabilities + $0 no change in equity = $100k increase in assets
- $100k decrease in liabilities + $50k increase in equity = $50K in assets
- $100k no change in assets + $50k in equity = $150k increase in liabilities
- $100k decrease in liabilities – $0 no change in equity = $100k increase in assets
15. True or False: Bonds Payable are long-term debt securities issued by a company that promises to pay back the principal at some specified point in the future.
- False
- True
16. Assets have a normal _________ balance.
- Credit
- Debit
17. Suzanne owns a clothing store in a small beach town called ‘Sunny Side Threads’. She wants to expand her brand’s influence by using a van she can hang clothes and accessories in for traveling to events along the coast during summer.
If Suzanne were to purchase a $45,000 van with a bank loan, paying $12,000 down, at 6.99% over 72 months, where would the loan itself go on the balance sheet?
- Equity, under investments
- Liabilities, under short-term
- Liabilities, under long-term
- Assets, under PP&E
18. Continuing from question 6, where would Suzanne’s payments due in the current year (or the next 12 months) be recorded on the balance sheet?
- Current Liabilities
- Current Assets
- Long-term Liabilities
- Long-term Assets
19. The following are non-current liabilities except:
- Deferred Revenue
- Notes Payable
- Deferred Income taxes
- Bonds Payable
20. Tosin has a customer who has already paid him to come pressure wash their house next month. Tosin would record this payment as a _______?
- Non-Current Liability
- Current Liability
21. The following are current liabilities except:
- Deferred Revenue
- Compensation and Benefits
- Notes Payable
- Short-term Loans Payable
22. True or False: When a business opens a line of credit with a vendor they are able to use that credit anywhere as long as it’s in the United States.
- True
- False
23. When setting up an account to document a line of credit in QuickBooks, you need to:
- Set up two separate accounts, one for the principal and an expense account for interest
- Set up an account for the person responsible for paying the line of credit down
- Set up an S-Corp to ensure you can accurately enter data in QuickBooks
24. Seymore Fish takes out vendor credit of $5500 with “Akon Aquatics Custom Tank Supplies” to replace his custom-made fish tanks for “Seymore’s Sea Store” where he sells pet fish and small sea creatures.
Seymore would credit his line of credit under _______ for $5,500 and debit his _____ for $_______?
- Current assets and Cash and cash equivalents; $4,000
- Long-term debt and Liabilities; $5,500
- Accounts payable and Fixed Asset- Fish Tank; $5,500
25. Seymore Fish of “Seymore’s Sea Store” purchased the glass and special paneling needed to rebuild his fish tanks for $2,000 from “Akon Aquatics Custom Tank Supplies”.
Should he:
- Record the purchases as soon as the bill arrives, even though the payments have not yet been made to Akon Aquatics Custom Tank Supplies.
- Record the purchases after the bill arrives and payment to Akon Aquatics
- Record the purchase after the full amount of the line of credit from Akon
26. When Seymore makes purchases from, but still owes money to “Akon Aquatics Custom Tank Supplies” for the line of credit, he records the $2,000 of purchases in the journal entry by:
- Debiting the supplies purchased under the liability named Debt and crediting PP&E under noncurrent assets for equipment for $2,000
- Debiting the supplies purchased under the equity named Seymore’s Stash and crediting the investment under store revenue for $2,000
- Debiting the supplies purchased under the expense named New Tank Supplies for $2,000 and crediting Accounts payable for $2,000
27. Now, Seymore has used and paid off the $2,000 line of credit he owed to “Akon Aquatics Custom Tank Supplies”. This journal entry should:
- Debit financial inputs for $1,500 and credit share equity for $2,000.
- Debit notes and loans payable for $2,000 and credit investments for $2,000.
- Debit accounts payable for $2,000 and credit cash for $2,000.
28. Gift card purchases from “Penelope’s Punky Pins” would be considered deferred revenue.
- True
- False
29. Why is deferred revenue considered a liability?
- Because the price of the good or service may fluctuate
- Because it is technically for goods or services still owed to customers
- Because it is considered an expense until the payment is collected
30. Deferred Revenues are not considered revenue until the product or service has been provided, thus they are not reported on the income statement.
- True
- False
31. When a customer gives you an advance payment, you will decrease the deferred revenue account. As you deliver goods or services, your deferred revenue account will increase.
- False
- True