On June 1, 2014, Siebens Enterprises loaned $20,000 to Tyler Company for one year at 8 percent interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year's interest on May 31, 2015.
What amounts will Siebens report on its 2014 statement of cash flows?
A) $0
B) A cash outflow of $20,000 shown as an operating activity
C) A cash outflow of $20,000 and an inflow of $800 for interest
D) A cash outflow of $20,000 shown as an investing activity

Question

Quizplus · Accepted Answer

The loan of $20,000 is a cash outflow and is classified as an investing activity because it involves lending money, which is considered an investment in another entity.

On June 1, 2014, Siebens Enterprises Loaned $20,000 to Tyler