Choose the right answer: Payment of interest is considered an operating activity
ID: 2571659 • Letter: C
Question
Choose the right answer:
Payment of interest is considered an operating activity on the statement of cash flows.
The adjusting entry to recognize interest expense is an asset use transaction.
An eight-month, 6% note for $10,000 will require the issuer to pay $600 in interest.
Interest expense is considered an operating expense on the income statement.
Payment of interest is considered an operating activity on the statement of cash flows.
The adjusting entry to recognize interest expense is an asset use transaction.
An eight-month, 6% note for $10,000 will require the issuer to pay $600 in interest.
Interest expense is considered an operating expense on the income statement.
Explanation / Answer
Option 1: Payment of interest is an will not affect the operating activity so this statement is incorrect.
Option 2: Adjusting entry for interest expenses it may be for assets and operating Expenses also.
Option 3 = Eight months interest @ 6% for $10,000 = $ 600 * 8months / 12 months = $ 400 , So this statement is also incorrect.
Option 4 = Interest Expenses is the operating expenses on the income statement, This option is correct.
Answer = Option 4 = Interest expense is considered an operating expense on the income statement