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Bookkeeping Certification — Practice Exam

Liabilities and notes: practice questions

Our Bookkeeping bank has 7 questions on this topic. Here are 3 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

A $10,000 loan payment of $1,200 includes $200 interest. What is the entry?

  1. Debit Notes Payable $1,200; credit Cash $1,200
  2. Debit Cash $1,200; credit Notes Payable $1,200
  3. Debit Interest Expense $1,200; credit Cash $1,200 for the whole loan payment
  4. Debit Notes Payable $1,000; debit Interest Expense $200; credit Cash $1,200
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D. Debit Notes Payable $1,000; debit Interest Expense $200; credit Cash $1,200 — Only the principal reduces the loan balance.

Question 2

What is the current portion of long-term debt?

  1. The part of a long-term loan due within the next year
  2. The interest on the loan that will be paid during the current year
  3. The total loan
  4. The part already paid
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A. The part of a long-term loan due within the next year — It is shown as a current liability.

Question 3

Which liability is usually classified as current?

  1. A 20-year mortgage (whole balance)
  2. Deferred tax due in 5 years
  3. Accounts payable
  4. Bonds payable due in 10 years
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C. Accounts payable — Current liabilities are due within a year.

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