The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to:
A)evaluate internal control over securities.
B)determine the validity of prepaid interest expense.
C)ascertain the reasonableness of imputed interest.
D)detect unrecorded liabilities.

Question

Quizplus · Accepted Answer

The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to detect unrecorded liabilities. This is done by comparing the interest expense recorded in the financial statements to the interest expense that should have been recorded based on the amount and terms of the interest-bearing obligations outstanding during the year. Any difference between the two amounts could indicate the presence of unrecorded liabilities.

The Primary Reason for Preparing a Reconciliation Between Interest-Bearing Obligations