Question

Oklahoma Oil Corp. paid interest of $780,000 during 2021, and the interest payable account decreased by $132,000. What was interest expense for the year

Answer 1

Answer:

$648,000

Explanation:

interest expense for the year = total interest paid - interest payable = $780,000 - $132,000 = $648,000

The interest payable was carried over form the previous year, so it was recorded as interest expense for 2020. This is why it cannot be included in the interest expense for this year.