We add an increase in interest payable to interest expense in arriving at cash paid for interest under the direct method.

Question

Quizplus · Accepted Answer

Under the direct method, cash paid for interest is calculated by adjusting interest expense for changes in interest payable, not by adding the increase in interest payable. An increase in interest payable would be subtracted from interest expense to determine cash paid.

We Add an Increase in Interest Payable to Interest Expense