If prepaid interest at the beginning of the period was zero and at the end of the period was $4,000, and interest expense appears in the income statement for the year as $17,300, how much was paid out in cash for interest during the year?
A) $13,300
B) $17,300
C) $21,300
D) $4,000

Question

Quizplus · Accepted Answer

The total cash paid out for interest during the year is calculated by adding the interest expense for the year to the increase in prepaid interest, then subtracting any interest that was prepaid at the beginning of the year. Since the prepaid interest at the beginning was $0 and it increased to $4,000 by the end of the year, and the interest expense for the year was $17,300, the total cash paid out for interest is $17,300 + $4,000 = $21,300.

If Prepaid Interest at the Beginning of the Period Was