Practice Quiz

CLEP Accounting

Category - Accounting

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Larry’s Lobsters keeps its operating cash in an interest-bearing checking account and they earn $150 in interest during the year. Where is that interest shown?
  1. In the non-operating income section of the income statement.
  2. In the operating income of the income statement.
  3. On the balance sheet.
  4. As a note on the income statement.
  5. On the statement of cash flows.
Explanation
Answer - A - Interest earned from the checking account will appear in the non-operating income section of the income statement.

Key Takeaway: If the interest earned is outside the scope of the company’s main operations, which in this case is the lobster business, then the interest earned is noted in the non-operating income section of the income statement.
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