Assuming no adjusting journal entries have been made during the year,the journal entry on the due date of the cash interest payment for bonds issued at a premium has just been prepared.Which of the following is not an effect of the entry?

A) An increase in expenses and a decrease in liabilities.
B) An increase in expenses and an increase in liabilities.
C) A decrease in both liabilities and stockholders' equity.
D) A decrease in both assets and liabilities.

Question

Tanner Reinheimer · Accepted Answer

Final Answer : B, Explanation :  On the due date of the cash interest payment for bonds issued at a premium, the company would debit interest expense and credit cash. This results in an increase in expenses and a decrease in assets, but there is no direct impact on liabilities. Therefore, option B is incorrect. Option A is correct because there is an increase in expenses and a decrease in liabilities. Option C is incorrect because there is only a decrease in liabilities, not in stockholders' equity. Option D is incorrect because there is no decrease in assets, only a decrease in the cash balance.

Definitions

Learning Objectives

Learning Objectives

Related questions