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 type of mortgage clause prevents a buyer from assuming an existing mortgage loan?

Subordination clause

Due-on-sale clause

Prepayment penalty clause

Acceleration clause

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Verified step by step guidance

Understand the concept of a 'Due-on-sale clause': This clause is a provision in a mortgage contract that requires the borrower to pay off the remaining balance of the loan when the property is sold or transferred. It prevents the buyer from assuming the existing mortgage loan.

Compare the 'Due-on-sale clause' with other clauses mentioned in the problem: For example, a 'Subordination clause' deals with the priority of liens, a 'Prepayment penalty clause' imposes a fee for early repayment, and an 'Acceleration clause' allows the lender to demand full repayment if the borrower defaults.

Identify the purpose of the 'Due-on-sale clause': Its primary function is to protect the lender by ensuring that the loan is repaid in full when ownership changes, rather than allowing the buyer to take over the existing loan terms.

Analyze why the 'Due-on-sale clause' is the correct answer: It directly addresses the prevention of a buyer assuming an existing mortgage loan, which is the focus of the question.

Conclude that the 'Due-on-sale clause' is the correct choice based on its definition and purpose, as it aligns with the problem's requirement to prevent loan assumption by a buyer.