Question

Which of the following statements about bonds and notes is not correct? multiple choice

O a company can borrow the funds necessary to finance its activities using bonds or promissory notes.
O borrowings using bonds or notes are initially recorded with a journal entry that debits cash and credits the relevant liability account.
O the journal entry that records interest owed on bonds and notes includes a debit to interest expense and a credit to interest payable.
O bonds payable and notes payable are always classified as noncurrent liability accounts.

Answer 1

The correct statement about bonds and notes is that bonds payable and notes payable are always classified as noncurrent liability accounts. D

Step-by-step explanation:

The correct statement about bonds and notes is that bonds payable and notes payable are always classified as noncurrent liability accounts.

When a company borrows funds using bonds or promissory notes, the borrowing is initially recorded with a journal entry that debits cash and credits the relevant liability account. The journal entry that records interest owed on bonds and notes includes a debit to interest expense and a credit to interest payable.

Therefore, the incorrect statement is that bonds payable and notes payable are always classified as noncurrent liability accounts.