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Indicate Whether Each of the Following Statements Is True or False

Question 49

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Indicate whether each of the following statements is true or false.

Premises:
The adjustment to recognize interest expense is an asset use transaction.
Interest expense is considered an operating expense on the income statement.
Payment of interest is considered an operating activity on the statement of cash flows.
Payment of interest on a one-year note due on March 1 will include a reduction in liabilities.
An eight-month,6% note for $10,000 will require the issuer to pay $600 in interest.
Responses:
True
False

Correct Answer:

The adjustment to recognize interest expense is an asset use transaction.
Interest expense is considered an operating expense on the income statement.
Payment of interest is considered an operating activity on the statement of cash flows.
Payment of interest on a one-year note due on March 1 will include a reduction in liabilities.
An eight-month,6% note for $10,000 will require the issuer to pay $600 in interest.
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