Question

Flipflops Inc. borrowed $4.4 million from its local bank on January 1, 2021, and issued a 4-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 7%. Installment payments are $1,299,004 annually. What amount would be reported in the cash flow from operations section of the cash flow statement

Answer 1

$308,000

Step-by-step explanation:

On this note, only the Interest expense is recorded under cash flow from operations section of the cash flow statement.

Thus we need to determine the interest expense first :

Interest expense = $308,000 ($4.4 million x 7%)