Question
Mountain Services (MS) prepares a statement of cash flows using the indirect method. In its Year4 income statement, MS reported $11,000 of interest expense on
Mountain Services (MS) prepares a statement of cash flows using the indirect method.
In its Year4 income statement, MS reported $11,000 of interest expense on its outstanding bonds.
During the year, MS paid its regular installments of $9,000 of interest in cash.
There was no interestpayableon the bonds at the beginning or ending of the year.
In its operating cash flow section of the statement of cash flows, MS should :
A.
Show a $2,000 positive adjustment to net income for the decrease in bond discount.
B.
Show a $2,000 negative adjustment to net income for the decrease in bond premium.
C.
Show a $2,000 negative adjustment to net income for the decrease in bond discount.
D.
Show an$11,000negative adjustment for interest paid.
E.
Show a$9,000negative adjustment for interest paid.
F.
Show a $2,000 positive adjustment to net income for the decrease in bond premium.
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