Burrows Inc

question 18

Multiple Choice

Burrows Inc. had an outstanding loan at the beginning of 2011 totaling $50,000. During 2011, $16,800 was paid out related to this loan broken down as follows: $15,000 towards principal and $1,800 in interest. Which of the following statements is correct regarding how the $16,800 payment should be depicted on the statement of cash flows?

• A) The entire $16,800 should be shown as a cash outflow for financing activities.
• B) The entire $16,800 should be shown as a cash outflow for investing activities.
• C) The $15,000 principal portion should be shown as a cash outflow for financing activities, and the $1,800 in interest should be shown as a cash outflow for operating activities.
• D) The $15,000 principal portion should be shown as a cash outflow for investing activities, and the $1,800 in interest should be shown as a cash outflow for operating activities.

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