A transaction has been recorded in the journal of Davis Company as follows:

Which of the following describes the effect of this transaction on the company's financial statements?
A)Decreases Liabilities
B)Increases Stockholders' Equity
C)Increases Liabilities
D)Decreases Assets

Question

A transaction has been recorded in the journal of Davis Company as follows:

Which of the following describes the effect of this transaction on the company's financial statements?
A)Decreases Liabilities 
B)Increases Stockholders' Equity 
C)Increases Liabilities 
D)Decreases Assets

Quizplus · Accepted Answer

This journal entry to accrue interest expense increases Interest Payable (a liability)and increases interest expense,which decreases net income and stockholders' equity (Retained Earnings).

A Transaction Has Been Recorded in the Journal of Davis