Question

Acquiring assets by taking on debt is one way you can accumulate assets. And many of these loans will fall into the category of long-term liabilities. But, in order to present them on the balance sheet correctly, the following must be known about the loan. Complete each statement as it applies to loans.

Regardless of the type of loan, only the ______________ is shown on the balance sheet. Options for blank: Principal borrowed/ latest outstanding loan balance/ loan balance plus any current interest due.

The ______ (current/initial/total) loan balance is NOT what is currently owed but what _________________( is split between current and long-term on the balance sheet/ was originally borrowed/ is the long-term principal and any interest due)

The portion of a loan listed as a liability on the balance sheet is only the ______________________ (total principal and interest not yet paid/ current portion due on the loan/ loan's principal)

Now that you have an understanding of assets and liabilities, an easy formula can determine your net worth. Again, recalling that net worth equals total assets minus total liabilities, complete the following statements

________ (.Solvency/ Net worth/ Financial security) : the fair market value of assets owned less liabilities owed.

________ ( Equity/Solvency/Financial security): the amount left after selling assets and paying off all liabilities

_________ (Insolvency/ In need of Assets/ Proceeding to bankruptcy) Net worth is less than zero.

Answer 1

Acquiring assets by taking on debt is one way you can accumulate assets. And many of these loans will fall into the category of long-term liabilities. But, in order to present them on the balance sheet correctly, the following must be known about the loan. Complete each statement as it applies to loans.

Regardless of the type of loan, only the loan balance plus any current interest due is shown on the balance sheet.

The Total loan balance is NOT what is currently owed but what is split between current and long-term on the balance sheet

The portion of a loan listed as a liability on the balance sheet is only the current portion due on the loan

Now that you have an understanding of assets and liabilities, an easy formula can determine your net worth. Again, recalling that net worth equals total assets minus total liabilities, complete the following statements

Net worth : the fair market value of assets owned less liabilities owed.

Solvency: the amount left after selling assets and paying off all liabilities

Insolvency Net worth is less than zero.

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