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

question 111

Multiple Choice

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

• A)Total liabilities increase by only the amount of the credit to bonds payable.
• B)Discount on bonds payable is reported on the balance sheet as a contra-liability account.
• C)Assets increase by the amount of the debit to cash.
• D)The cash inflow (debit) is reported as a cash flow from financing activities.

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Definitions:

Stay Agreement

A legal document that temporarily suspends proceedings or actions as agreed upon by the involved parties.

Materially Breached

signifies a significant failure to comply with the terms of a contract, invalidating the agreement.

Adequate Consideration

Consideration in a contract that is fairly equitable and of sufficient value, considering the facts of the case and the circumstances surrounding the agreement.

Forbearance

The temporary postponement of mortgage payments or enforcement of a policy, often to prevent foreclosure.