Final answer:
Oklahoma Oil Corp.'s interest expense for the year was calculated by adding the interest paid, which was $785,000, to the decrease in interest payable, which was $125,000, resulting in a total interest expense of $910,000.
Step-by-step explanation:
The interest expense for Oklahoma Oil Corp. for the year can be determined by taking into account the interest paid and the change in the interest payable account. The question states that Oklahoma Oil Corp. paid interest totalling $785,000 and the interest payable account decreased by $125,000. This decrease in the payable account suggests that part of the payment went towards reducing the amount owed from previous periods, not just covering the interest expense for the current period.
To calculate the actual interest expense for the year, you need to add the decrease in the interest payable account to the interest that was paid. This gives you the total interest expense incurred by the company for the year, which is:
Interest Paid + Decrease in Interest Payable = Total Interest Expense
Interest Expense = $785,000 + $125,000
Interest Expense = $910,000.
So, Oklahoma Oil Corp.'s interest expense for the year was $910,000.