An Expense Occurred in 2016, but It Is Not Paid

question 206

Multiple Choice

An expense occurred in 2016, but it is not paid until 2017. Using accrual accounting, the expense should appear on:

• A)the 2016 income statement.
• B)the 2017 income statement.
• C)whichever income statement the business prefers.
• D)both the 2016 and 2017 income statements.

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Definitions:

Going Private

The process by which a publicly traded company is transformed into a privately held entity.

Hostile Takeover

A takeover to which the management of the target corporation objects.

Leveraged Buyout

The acquisition of a company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition.

Self-tender Offer

A situation where a company offers to buy back its own shares from shareholders, usually at a premium over the current market price.