A Company Prepared the Following Journal Entry: Which of the Following

question 62

Multiple Choice

A company prepared the following journal entry: Which of the following statements correctly describes the effect of this journal entry on the financial statements?

• A)Total liabilities increase by the amount of the debit to cash.
• B)Premium on bonds payable is reported on the balance sheet as a contra-liability account.
• C)Stockholders' equity increases by the amount of the credit to premium on bonds payable.
• D)The credit to bonds payable is the amount reported as a cash flow from financing activities.

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Definitions:

Product Costs

The direct costs attributable to the production of products sold by a company, such as raw materials, labor, and manufacturing overhead.

Period Costs

Expenses that are not directly tied to the production process and are expensed in the financial period they are incurred.

Salespersons' Commissions

Payments made to sales staff that are typically based on a percentage of the sales they generate.

Product Cost

The total amount spent to produce a product, including raw materials, labor, and overhead costs directly tied to the production process.