Jones Company issued bonds with a $200,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 7½% stated rate of interest that is payable in cash on December 31^st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information:The amount of cash outflow from operating activities shown on Jones's December 31, Year 2 statement of cash flows would be: A) $15,000. B) $16,200. C) $13,800. D) $17,400.

Question

Quizplus · Accepted Answer

The cash outflow from operating activities for the interest payment is calculated using the stated interest rate of 7.5% on the face value of the bonds ($200,000). Thus, the annual interest payment is $200,000 * 7.5% = $15,000. This is the amount of cash that flows out due to interest payments, which is considered an operating activity.

Jones Company Issued Bonds with a $200,000 Face Value on January