A company prepared the following journal entry: Which of the following statements incorrectly describes the effect of this journal entry on the financial statements?
Cash
Discount on bonds payable
Bonds payable
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.

Question

A company prepared the following journal entry: Which of the following statements incorrectly describes the effect of this journal entry on the financial statements?
Cash
Discount on bonds payable 
Bonds payable
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.

Quizplus · Accepted Answer

The total liabilities increase by the net amount of the bonds payable minus the discount on bonds payable, not just the amount of the credit to bonds payable.

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