On December 31, Colfax Co. recognized accrued interest expense in the amount of $1,500. The interest expense was related to a discount note that Colfax had issued earlier in the year.AssetsLiabilitiesEquityRevenuesExpensesNet IncomeStmt of Cash Flows???????
What will be an ideal response?
(NA) (I) (D) (NA) (I) (D) (NA)
Accruing interest expense on a discount note increases liabilities (by decreasing the discount on notes payable, a contra liability account) and decreases stockholders' equity (retained earnings). It increases expenses (interest expense), which decreases net income. It does not affect the statement of cash flows.
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