When Making the Adjustment for Accrued Interest the Bond Discount

question 115

Multiple Choice

When making the adjustment for accrued interest the Bond Discount account was not taken into consideration. This error would cause:

• A) the period end assets to be overstated.
• B) the period end liabilities to be understated.
• C) the period's net income to be overstated.
• D) Both B and C are correct.

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Definitions:

Stockholders' Equity

The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings, reflecting the residual assets of the company that would be returned to shareholders if all assets were liquidated and all debts paid.

Increase Assets

Enhancing the value of a company's resources or acquiring new physical, financial, or intangible properties that can provide economic benefits.

Decrease Assets

The reduction in the value or amount of the resources owned by a company, which can result from sales, disposal, or depreciation.

Accounting Equation

The fundamental equation underpinning the double-entry bookkeeping system: Assets = Liabilities + Equity.