Inventory Was Purchased by a Business for $3 000; $2

question 11

Multiple Choice

Inventory was purchased by a business for $3 000; $2 000 was paid in cash and the rest was put on account. The journal entry will include:

• A) a credit to inventory of $1 000.
• B) a credit to accounts payable of $2 000.
• C) a credit to cash of $3 000.
• D) a credit to accounts payable of $1 000.

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Definitions:

Securities

Assets indicating equity in a publicly-traded company, a bond signifying indebtedness to a company or government, or options granting ownership rights.

Collateralized Debt Obligations

Collateralized debt obligations (CDOs) are complex financial instruments that pool together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.

Default Risk

The potential that a borrower will fail to meet the obligations of a loan or debt agreement.

Mortgages

Loans specifically designed for the purchase of real estate, secured by the property itself.