A company prepared the following journal entry: Which of the following statements correctly describes the effect of this journal entry on the financial statements?
Interest expense
Discount on bonds payable
Cash
A) The bonds payable book value increases by the amount of the credit to discount on bonds payable.
B) The bonds payable book value decreases by the amount of the credit to cash.
C)Stockholders' equity decreases by the amount of the credit to cash.
D)The cash payment is reported as a cash flow from financing activities.

Question

A company prepared the following journal entry: Which of the following statements correctly describes the effect of this journal entry on the financial statements?
Interest expense
Discount on bonds payable 
Cash
A) The bonds payable book value increases by the amount of the credit to discount on bonds payable.
B) The bonds payable book value decreases by the amount of the credit to cash.
C)Stockholders' equity decreases by the amount of the credit to cash.
D)The cash payment is reported as a cash flow from financing activities.

Quizplus · Accepted Answer

The credit to the discount on bonds payable reduces the discount, thereby increasing the book value of the bonds payable.

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