Which of the Following Statements Is Correct

question 178

Multiple Choice

Which of the following statements is correct?

• A)When a future expense is paid in advance,the payment is normally recorded in a liability account called Prepaid Expense.
• B)Promises of future payment are called accounts payable.
• C)Increases and decreases in cash are always recorded in the retained earnings account.
• D)An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business.
• E)Liabilities include accounts receivable.

---

Definitions:

Watered Shares

Shares issued in exchange for property that has been overvalued. Also called watered stock. See also discount shares.

Overvalued

A financial situation where the price of an asset exceeds its intrinsic value.

Board of Directors

A group of individuals elected by the shareholders of a corporation to oversee the management and make major decisions affecting the company's policy and strategy.

MBCA

The Model Business Corporation Act, a set of statutory provisions designed for the incorporation and operation of a business corporation.