Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which one of the following best defines an amortized loan?

A loan that is repaid through regular, equal payments of principal and interest over its term.

A loan that is paid off in a single lump sum at the end of the loan period.

A loan that does not require any payments until the borrower defaults.

A loan that requires only interest payments until the maturity date, when the principal is repaid in full.

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Verified step by step guidance

Step 1: Understand the concept of an amortized loan. An amortized loan is a type of loan where the borrower makes regular, equal payments over the term of the loan. Each payment includes both principal and interest, gradually reducing the loan balance until it is fully paid off.

Step 2: Compare the definition of an amortized loan to the options provided in the problem. The correct definition should align with the idea of regular, equal payments of principal and interest over the loan's term.

Step 3: Analyze the other options provided in the problem. For example, a loan paid off in a single lump sum at the end of the loan period is not amortized, as it does not involve regular payments. Similarly, a loan requiring only interest payments until maturity is not amortized because the principal is repaid in full at the end.

Step 4: Eliminate options that do not match the definition of an amortized loan. Focus on identifying the option that describes regular, equal payments of principal and interest over the loan's term.

Step 5: Select the option that best defines an amortized loan based on the analysis. Ensure the chosen option aligns with the concept of gradual repayment through equal installments.