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

Quizplus · Accepted Answer

The cash payment for interest is reported as a cash flow from operating activities, not financing activities.

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