Kier Company issued $760,000 in bonds on January 1, 2016. The bonds were issued

Question

Kier Company issued $760,000 in bonds on January 1, 2016. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6.50% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be:

Option A

Option B

Option C

Option D

Kier Company issued $760,000 in bonds on January 1, 2016. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6.50% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the 12/31/2016 income statement and the cash flow from operating activities shown on the 12/31/2016 statement of cash flows would be:

Explanation / Answer

Interest expense = 760000*6.5% = 49400

Interest expense for the period should be report in income statement on december 31, 2016 and cash outflow because 49400 as interest expense paid on 12/31/2016

so answer is a) Option A

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