Question

Interest expense paid in cash is a cash outflow from operating activities on the statement of cash flows prepared under the indirect method as it is part of net income. O True False

Answer 1

*False.

Correct Statement: *Interest expense paid in cash is a cash outflow from operating activities on the statement of cash flows prepared under the direct method as it is part of net income.

*The Interest expense paid is recorded in the income statement, Since the balance sheet did not include an accrual for interest payable.

*it should be part of income statement and it comes under the head of operating activities.

*Direct Method: The interest expenses paid-It is Cash outflow; It should be deducted from the cash receipts.

*Indirect Method: It should not part of any head of activities. It adjusts net income for items that do not affect cash,

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