On August 31, ABC Co. partially refunded $900,000 of its outstanding 10% note payable made one year ago to the I-Fleecem State Bank by paying $900,000 plus $90,000 interest, having obtained the $990,000 by using $262,000 cash and signing a new one-year $800,000 note discounted at 9% by the bank. Instructions .

1. What effect did the interest expense have on reported net income and cash flows for the period ending December 31?