ok so my becker book describes this for statement of cash flows-direct method:
other operating expenses
– decrease in prepaid operating expenses
+ increase in prepaid expenses
+ decrease in accrued liabilities
– increase in accrued liabilities
= cash paid for other expenses
then i get a ninja mcq like this..
In its cash flow statement for the current year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the current year. Changes occurred in several balance sheet accounts as follows:
Accrued interest payable $17,000 decrease
Prepaid interest 23,000 decrease
In its income statement for the current year, what amount should Ness report as interest expense?
A.
$30,000
B.
$64,000
C.
$76,000
Incorrect D
$110,000
Explanation:
Interest expense = Cash interest + Decrease in prepaid interest – Decrease in interest payable
Interest expense = $70,000 + 23,000 – $17,000 = $76,000
Another simple way to analyze a question like this is to prepare a journal entry reflecting the appropriate account changes. In this case:
Interest Expense Unknown
Interest Payable (decrease) 17,000
Prepaid Interest (decrease) 23,000
Cash (interest paid) 70,000
Interest expense must be debited for $76,000 to balance the entry.
what am i missing here?
.