[yoshibaro]

Jim co recorded an interest expense of $6,000 for 2005. Which one of the following line items would be included in the operating section of the jim co's 2005 indirect method statement of cash flows?
A. Add increase in interest payable... $6,000
B. Add increase in interest payable... $1,000
C. Subtract increase in interest payable... ($1,000)
D. Subtract decrease in interest payable... ($5,000)


CASH T
Debit Side Credit Side
-Balance 1/1... 225,000
-Collection from Customers 60,000... 44,000 Payments to suppliers
-Stock Issued... 20,000... 13,000 Purchase of machinery
-5yrBankLoan... 75,000... 100,000 Salaries paid
-SaleOfUsedVan,. 10,000... 4,000 Dividends paid
... 5,000 Interest payment
... 1,000 Garage rental
_____________________________
... Balance 12/31 223,000




My thought is that it is "C".

I assume that the indirect is the net chance in cash, not the actual cash flow. Because the interest payment was only 5k in the t-account and they had a 6k expense, 1 is still owed. The t-account will not show the 1k because it only covers the slow of $$. The indirect will show that it is owed.

Is my logic correct?