4. An Accounts Payable normally results from which of the following transactions

Question

4. An Accounts Payable normally results from which of the following transactions? A. Purchasing accounts for cash. B. Purchasing property, plant and equipment on credit C. Purchasing goods and services from suppliers on credit. D. All of these. 5. When a company issues a bond at a premium: A. when the n B. as of the enc A the B. investors perceive the bond to be a very safe investment C. the company's interest expense will be less than the interest paid each year D. the company's interest expense will be more than the interest paid each year C. when princlp when the inten nagazine publis ses the balance 6. The amortization of bond discount A. increases the cash paid to bondholders for interest. 8. resuits in bond interest expense being greater than the interest paid to bondholders C. results in bond interest expense being less than the interest paid to bondholders D. reduces the carrying value of bonds payable on the balance sheet. h is received f azines are prin zines are maile ptions are sok 9 entry to 7. Southern Company's accountant failed to accrue as of 12/31/13 employee health insurance benefits in Interest E program expenses that were incuirred in 2013 and that will be paid in 2014. The result of this omission is n Interest B to: A overstate 2013 net income and understate noncurrent liabilities at 12/31/13. B. understate 2013 expenses and understate current liabilities at 12/31/13. C. understate 2013 expenses and overstate current liabilities at 12/31/13. D. understate 2013 net income and overstate assets at 12/31/13. nterest Pay

Explanation / Answer

4. Answer is C.

A. When cash is involved accounts pable does not arise.

B. Normally Prpoerty, plant and equipment are purchased on long term liabilities.

5. Answer is C.

The entry to be rocrded will be as follows

Interest expense Dr

Premium on bond issue Dr

Cash Cr.

We can see that interest expense is the net of the premium amortized and the actual interest paid

6. Answer is B.

The entry to be recorded will be as under.

Interest expense Dr.

Discount on bond issue Cr.

Cash Cr.

We can see that interest expense is the sum of the discount amortized and the actual interest paid.

7. Answer is B.

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