interest

Question 1

cash interest+decrease in prepaid interest-decrease in interest payable=?

interest expense-unknown
interest payable(decrease)-X
              Prepaid interest(decrease)--XX
              Cash( interest paid)---XX

Answer 1

interest expense.

Question 2

if a a note is maturing in less than one year. is it recorded at face value?

Answer 2

yes,

Question 3

fern co. has net income of $100,000, including 20000 interest revenue from municipal bonds and $10000 paid for officer’s life insurance,, the tax rate of the year is 10%. what is the effect tax rate?

Answer 3

9%, the effective tax rate is the taxes actually paid over net income, $100000-20000 for muni bond interest+10000 paid for officers ;ofe insurance= 90000, taxes paid for are 90000*0.1=9000. then 9000 over the original $100000 is an effective interest rate of 9%.

Question 4

During the year, Bay Co. constructed machinery for its own use and for sale to customers. Bank loans financed these assets both during construction and after construction was complete. How much of the interest incurred should be reported as interest expense in the year-end income statement?

Answer 4

Interest incurred for machinery for own use: interest incurred after completion; Interest incurred for machinery held for sale: all interest incurred

Once an asset is complete, and ready for use or sale, then any interest incurred after that is an interest expense, not capitalized.