Question

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, 2016. The note carried a one-year term. The amount of cash flow from operating activities on the 2016 statement of cash flows would be:

A. $1,920.
B. $800.
C. $24,000.
D. zero

Answer 1

D. zero

Step-by-step explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

This transaction does not involve any operating transaction. So, the answer would be zero