On January 1, Jim Shorts Corporation issued $300 million face value bonds for $580 million. During the same year, $1,500,000 of the bond premium was amortized. On a statement of cash flows prepared by the indirect method, Jim Shorts Corporation should report:

Question

Quizplus · Accepted Answer

The amount of interest paid was more than the effective interest expense on the bonds at a premium. Thus the amortization must be subtracted from net income to adjust for the cash payments in excess of the amount expensed.

On January 1, Jim Shorts Corporation Issued $300 Million Face