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Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions.

-Based on this information alone,what is the amount of net income (loss)that will be reported on the Year 2 income statement?
A)$770
B)$630
C)$(190)
D)$1,890

Question

[The following information applies to the questions displayed below.]

Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions.

-Based on this information alone,what is the amount of net income (loss)that will be reported on the Year 2 income statement?
A)$770
B)$630
C)$(190)
D)$1,890

Quizplus · Accepted Answer

Interest expense = $36,000 × 7% × (3 ÷ 12)= $630
Net income = Revenue of $1,400 - Interest expense of $630 = $770

[The Following Information Applies to the Questions Displayed Below