Master Equipment Has a $17,400 Liability to Arrow Paint Co

question 102

Multiple Choice

Master Equipment has a $17,400 liability to Arrow Paint Co.When Master Equipment makes a partial payment of $7,600 on this liability,which of following occurs on Master's books?

• A)Retained earnings are debited $9,800.
• B)The Accounts Payable account is credited $9,800.
• C)The Cash account is debited $7,600.
• D)The Accounts Payable account is debited $7,600.

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Definitions:

Trading Securities

Financial assets that are bought and sold with the intention of generating profits from short-term price fluctuations.

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, other than in a forced or liquidation sale.

Cost Method

An accounting method used to record investments, where the investment is recorded at its acquisition cost without recognizing periodic gains or losses.

Outstanding Stock

The total shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.