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14 March, 07:07

Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 5% annual interest rate. Riley earned cash revenue of $1020 in Year 1 and $950 in Year 2. Assume no other transactions. The amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows would be:

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  1. 14 March, 11:01
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    The amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows would be - $850 or $850 outflow

    Explanation:

    The computation of the cash flow from the operating activities for year 2 is shown below:

    = Cash revenue in year 2 - interest on notes payable

    = $950 - $1,800

    = - $850

    The negative amount shows an outflow of cash.

    The interest on the note payable is computed by

    = Borrowed amount * interest rate

    = $36,000 * 5%

    = $1,800
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