(Learning Objective 1: Linking accrual accounting and cash fl ows) Capeside Corporation began 20X6 owing notes payable of $3.9 million. During 20X6, Capeside borrowed

$2.3 million on notes payable and paid off $2.0 million of notes payable from prior years.

Interest expense for the year was $1.8 million, including $0.1 million of interest payable accrued at December 31, 20X6.

Show what Capeside should report for these facts on the following fi nancial statements:

1. Income statement

a. Interest expense 2. Balance sheet

a. Notes payable

b. Interest payable