Kier Company issued $200,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6½% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the December 31, Year 1 income statement and the cash flow from operating activities shown on the December 31, Year 1 statement of cash flows would be:

Question

Quizplus · Accepted Answer

$200,000 × 0.065 = $13,000; Payment of interest on December 31, Year 1 increases interest expense by $13,000 and is reported as a cash outflow for operating activities.

Kier Company Issued $200,000 in Bonds on January 1, Year