Riley Company borrowed $34,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 4% annual interest rate. Riley earned cash revenue of $1,000 in Year 1 and $800 in Year 2. Assume no other transactions. The amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows would be:

the amount that should be reported is -$560

Explanation:

The computation of the amount that should be reported in the operating activities section of the cash flow statement is shown below:

Revenues in year = $800

Less: total interest paid i.e. -$1,360

($34,000 × 4% × 9 months ÷ 12 months) + ($34,000 × 4% × 3 months ÷ 12 months)

So, the amount that should be reported is -$560

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