Question

Each year, Mogul Enterprises prepares a reconciliation schedule that compares its income statement with its statement of cash flows on both the direct and indirect method bases. In its 2019 income statement, Mogul reported $11,000 of interest expense on its outstanding bonds. During the year, Mogul paid its regular installments of $9,000 of interest in cash. In its reconciliation schedule, Mogul should:

Answer 1

$2,000 positive adjustments to net income under the indirect method for the decrease in bond discount

Step-by-step explanation:

$11,000 of interest expense on its outstanding bonds.

Less $9,000 of interest in cash.

Balance $2,000

Therefore in its reconciliation schedule, Mogul should show a $2,000 positive adjustments to net income under the indirect method for the decrease in bond discount.