Glove June 2007 – Convertible Bonds

Consolidated SFP question has convertible bonds issued by the Parent.

1. Split equity/liability (fine)
2. Amortize the liability using effective interest method
– b/f liability x
– Interest x
– Payment (x)
– c/f liability x

The issue is, I thought the interest paid would CR current assets (bank) (we have paid cash) but the answer CR group retained earnings?

The only reason I can think of is the interest is due on 1 Jun 06 and the reporting date is 31 May 06, so interest not paid yet but accrued – however this would still be a CR to current assets?

Thanks in advance