When Cash Is Received from Customers in the Form of a Refundable

question 114

Multiple Choice

When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in:

• A) A current liability.
• B) Revenue.
• C) Shareholders' equity.
• D) Paid-in capital.

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Definitions:

Accrued Interest

Interest that has accumulated over a period of time but has not yet been paid.

Premium

An amount paid for an insurance policy, or the price above the normal or nominal cost in financial transactions.

Discount

A reduction from the usual cost of something, often expressed as a percentage off the original price.

Convertible Bond

A financial instrument that allows the bondholder to convert the bond into a predetermined number of shares of common stock of the issuing company.