On January 1, Year 1, Jones Company issued bonds with a $200,000 face value, a stated rate of interest of 7.5%, and a 5-year term to maturity. The bonds were issued at 97. Interest is payable in cash on December 31st of each year. The company amortizes bond discounts and premiums using the straight-line method.What is the amount of cash outflow from operating activities shown on Jones' statement of cash flows for the year ending December 31, Year 2?

Question

Quizplus · Accepted Answer

The cash outflow from operating activities for interest is the cash interest payment, which is calculated as the face value of the bonds ($200,000) multiplied by the stated interest rate (7.5%), resulting in $15,000.

On January 1, Year 1, Jones Company Issued Bonds with a $200,000