A Business Received the Current Month's Utility Bill for $2,125,and

question 106

Multiple Choice

A business received the current month's utility bill for $2,125,and immediately paid it.Which journal entry is prepared?

• A)Debit Accounts Payable for $2,125 and credit Cash for $2,125.
• B)Debit Utilities Payable for $2,125 and credit Cash for $2,125.
• C)Debit Utilities Expense for $2,125 and credit Cash for $2,125.
• D)Debit Operating Expense for $2,125 and credit Accounts Payable for $2,125.

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Definitions:

Financial Leverage

Rephrased: Utilizing debt to finance additional assets, with the aim of increasing returns to equity holders, while also increasing financial risk.

Interest Tax Shield

The decrease in what one owes in income taxes by removing the cost of debt interest from the taxable income figure.

Capital Structure Puzzle

The term refers to the challenge and debate over the optimal composition of a company's debt and equity financing to maximize its value.

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity that maximizes a company’s stock price.