Madison Company issued an interest-bearing note payable with a face amount of $24,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term.The amount of cash flow from operating activities on the Year 1 statement of cash flows would be:

Question

Quizplus · Accepted Answer

The amount of cash flow from operating activities on the Year 1 statement of cash flows is zero because the note payable is a financing activity, not an operating activity. Operating activities consist of cash inflows and outflows related to the day-to-day operations of the business, such as sales revenue, expenses, and inventory purchases.

Madison Company Issued an Interest-Bearing Note Payable with a Face