In its cash flow statement for the current year, Ness Co. reported cash paid for interest of $70,000.  Ness did not capitalize any interest during the current year.  Changes oc­curred in several balance sheet accounts as follows:

In its income statement for the current year, what amount should Ness report as interest expense?

Answer C is correct.  The requirement is to calculate the amount of interest expense for the year.  Answer C is correct because the amount is calculated as cash paid for interest minus the decrease in accrued interest payable and plus the amount of decrease in prepaid interest, or $76,000 = $70,000 – $17,000 + $23,000.