Which of the Following Is True of the Accounting Entries

question 48

Multiple Choice

Which of the following is true of the accounting entries for debt securities?

• A)The receipt of interest revenue is recorded with a debit to Interest Revenue and a credit to Cash.
• B)Investments in debt securities are recorded at cost, including any brokerage fees paid.
• C)The receipt of interest revenue is recorded with a debit to Cash and a credit to Long-term Securities-Held-to-Maturity.
• D)Debt securities disposed of at maturity are recorded with a debit to the Short-term or Long-term Investments account and a credit to Cash.

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Definitions:

Principle Agency Problem

A situation in corporate governance where the interests of principals (owners) diverge from those of agents (managers), leading to potential conflicts.

Incentive

A benefit or reward intended to motivate or encourage a specific action or behavior in economic or organizational contexts.

Decision Maker

An individual or entity responsible for making choices that will impact outcomes in a business, policy, or personal context.

Agency Costs

Expenses arising from the conflict of interest between a company's management and its shareholders.