Question

6.
Sarah bought a coat on credit, a necklace with cash, a pair of earrings with money her friend loaned to her, and a ring with the money her grandparents sent for her birthday. Which one is a liability? (Choose all that apply)

A.
Necklace

B.
coat

C.
Ring

D.
Pair of earrings

Answer 1

B and D.

Explanation: A liability is an obligation to pay. The coat bought on credit creates an obligation (payable), and the earrings bought with a loan from a friend create a debt. The necklace (paid with cash) and the ring (bought with gifted money) are not liabilities.