nli AT&T; Wi-Fi 11:42 AM @ * 51%(.--+ ezto.mheducation.com connect. Ant Test S.

Question

nli AT&T; Wi-Fi 11:42 AM @ * 51%(.--+ ezto.mheducation.com connect. Ant Test S. Chapters 10 and 19. On January 1, 2016 the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, 2016. The annual payment on the loan based on the present value of annuity factor would be $81150 Which choice reflects the financial statement effects of the cash payment on December 31, 20167 nc Cash FI O Option

Explanation / Answer

The answer is Option B - Financial Cash Outflow Activity in Cash Flow.

The payment made on 31 December 2016 is made for the loan taken from the bank. The money received from the activity of raising money from Sun Bank is a financial activity. The cash outflow regarding the payment of the term loan in terms of principle and interest will also be classified as financial activity in the Cash Flow Statement.

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