Question

INTEREST EXPENSE XXX

PREMIUM ON BONDS PAYABLE XXX   

TO CASH XXX

WHICH OF THE FOLLOWING STATEMENTS INCORRECTLY DESCRIBES THE EFFECT OF THIS JOURNAL ENTRY ON THE FINANCIAL STATEMENT?

A. STOCKHOLDERS EQUITY DECREASES BY THE AMOUNT OF THE DEBIT TO INTEREST EXPENSE

b. assets decrease by the amount of credit to cash

c. the bonds payable book value decreases by the amount of debit to premium on bonds payable

d. the cash payment is reported as cash flow from financing activities

Answer 1