On January 1, 2016, Yi Corporation received cash from issuing 10-year $100,000 bonds at face value. The interest of $5,000 is paid annually to the bondholders on December 31. How do the issuance of the bonds and the payment of the interest affect Yi's financing activities section of the statement of cash flows for 2016?

Question

Zion Johnston

Business

1 January, 02:19

On January 1, 2016, Yi Corporation received cash from issuing 10-year $100,000 bonds at face value. The interest of $5,000 is paid annually to the bondholders on December 31. How do the issuance of the bonds and the payment of the interest affect Yi's financing activities section of the statement of cash flows for 2016?

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Paula Navarro · Answer 1

Answer: The issuance of the bonds affect the financing activities of the cash flow section positively as 100,000 cash is coming in by issuing the bond so this is a positive cash flow due to financing activities.

However the interest payment will not affect the financing activities section of the cash flow because interest payments are part of the operating cash flows according to U. S GAAP interest paid is an operating activity in the cash flow.