Question

Jefferson Company made a loan of $6,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of cash flow from operating activities that Jefferson would report in Year 1 and Year 2, respectively would bea. $360, and $0.b. $0, and $360.c. $90, and $270.d. $270, and $90.

Answer 1

Answer:

b. $0, and $360

Explanation:

It is zero in the first year because it is due by the end of the year So the decrease in interest payable in operating activities  would be $ 0 . It accrues but is not paid.

Balance of interest paid at the end of the year 1 would be zero

During the second it maybe paid and interest on it would be $ 360 so decrease in interest payable in operating activities would be $ 360.

Balance of interest paid at the end of the year 2 would be $ 360