Victor Company issued bonds with a $400,000 face value and a 3% stated rate of interest on January 1, Year 1. The bonds carried a 5-year term and sold for 93. Victor uses the straight-line method of amortization. Interest is payable on December 31 of each year.The amount of cash flow from operating activities on the December 31, Year 3 statement of cash flows would be:
A) $17,600.
B) $12,000.
C) $11,160.
D) $28,000.

Question

Quizplus · Accepted Answer

The cash flow from operating activities is the interest payment. The annual interest payment is $400,000 * 3% = $12,000.

Victor Company Issued Bonds with a $400,000 Face Value and a 3