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Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term.

-Based on this information alone,what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?
A)$1,920
B)$800
C)$24,000
D)$-0-

Question

[The following information applies to the questions displayed below.]

Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term.

-Based on this information alone,what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?
A)$1,920
B)$800
C)$24,000
D)$-0-

Quizplus · Accepted Answer

The $24,000 borrowed is classified as a financing activity,not an operating activity.No interest was paid in Year 1,so there is no cash flow related to the interest.

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