Onken Corporation's interest payable account balance at the end of 2009 and 2010 was $1,000 and $2,200, respectively. During 2010, Skilling's interest expense was $4,000. During 2010, how much cash did Onken pay for interest payments?

Question

Quizplus · Accepted Answer

The cash paid for interest payments can be calculated by adding the interest expense to the decrease in interest payable or subtracting the increase in interest payable from the interest expense. The interest payable increased by $1,200 ($2,200 - $1,000) from 2009 to 2010. Therefore, the cash paid for interest is $4,000 (interest expense) - $1,200 (increase in interest payable) = $2,800.

Onken Corporation's Interest Payable Account Balance at the End of 2009