Question

The following information pertains to Ash Co., which prepares its statement of cash flows using the indirect method: Interest payable at beginning of year: $15,000 Interest expense during the year: $20,000 Interest payable at end of year: $5,000 What amount of interest should Ash report as a supplemental disclosure of cash flow information?

Answer 1

Answer:

The amount of interest that ash should report as a supplemental disclosure of cash flow information is $ 30,000.

Explanation:

In income statement the amount of expenses are recorded keeping matching concept under consideration. However, in cashflow statement expenses that are paid in cash are shown as cash out flow.

Interest payment will be calculated as follow.

Opening balance       $ 15,000

Interest expense        $ 20,000

Closing Balance          ($ 5,000)

Payment                      $ 30,000

The interest payment of $ 30,000 will be reported in cash flows statement.