Question

Red Co. reported cash paid for interest of $55,000 in its statement of cash flows for the current year. Red did not capitalize any interest during the current year. The following changes on their balance sheet occurred: accrued interest payable decreased by $13,000 along with a decrease in prepaid interest of $21,500. What amount should Red report as interest expense in its current year statement of income

Answer 1

Answer:

$63,500

Explanation:

Interest expense paid in cash           $55000  

Less: Adjusted for accrued interest  $13,000

payable

Add: prepaid interest adjusted         $21,500

Interest expense in its current year  $63,500

statement of income