I originally guessed D, but it says it would be paid on the maturity date, so wo

Question

I originally guessed D, but it says it would be paid on the maturity date, so wouldn’t it be A now? Perez Corporation borrowed $40,000 from the bank on March 1, 2016, The note carried a 9% annual interest rate and a 1-year term to maturity. The company paid the principal and the interest in cash on the maturity date. What amount of cash paid for interest expense will Perez Corporation show on its 2016 and 2017 statements of cash flows? 2017 S$3,600 2016 $-0- 2017 $2700 $ 900 2017 2016 $3,600 2017 $3,000 $600

Explanation / Answer

Answer would be A

2016 - $ 0

2017 - $ 3,600

The question specifically states that the Company paid the principal and interest in cash on maturity date. The maturity date is in 2017. Hence, in 2016 no interest is paid and full interest for 1 year is paid in 2017.

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