The statement of profit or loss of Zang Co shows accrual-basis interest income for the year ended 30 June 2014 as $400.The comparative balance sheets show that interest receivable at 30 June 2013 and 30 June 2014 was $45 and $80 respectively.Determine the amount of cash received by way of interest during the year.

Question

Quizplus · Accepted Answer

Accrual-basis interest income for the year is $400, which means that interest income earned during the year is $400 regardless of whether it has been received or not. 
Therefore, the increase in interest receivable from 30 June 2013 to 30 June 2014 ($80 - $45 = $35) represents interest income earned during the year but not received in cash. 
To determine the amount of cash received, we need to subtract this increase in interest receivable from the accrual-basis interest income: 
Cash received = Accrual-basis interest income - Increase in interest receivable 
Cash received = $400 - $35 = $365 
Therefore, the correct answer is B.

The Statement of Profit or Loss of Zang Co Shows