Intermediate Accounting II

1) Interested A. Corp reported for year 20x3 $50,000 of interest expense, and the balance of Interest Payable had a net increase of $6,000 since 20x2. In addition, the balance in Discount on Bonds Payable had a net decrease of $4,000 since 20x2. When preparing the operating section of the 20x3 statement of cash flows how should those balance changes be treated? Under the INDIRECT method Under the DIRECT method A Add both changes to net income. Deduct both changes from interest expense. B Deduct both changes from net income. Add both changes to interest expense. C Add change in 1/P to net income, Deduct change in 1/P from interest expense, but deduct change in Discount from net income. but add change in Discount to interest expense. D Deduct change in 1/P from net income, Add change in 1/P to interest expense, but add change in Discount to net income. but deduct change in Discount from interest expense