The statement of profit or loss of Little Co shows accrual-basis interest income for the year ended 30 June 2019 as $4 000. The comparative balance sheets show that interest receivable at 30 June 2018 and 30 June 2019 was $500 and $800 respectively. The amount of cash received by way of interest during the year was:

Question

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The cash received by way of interest can be calculated by adjusting the accrual-basis interest income for the year by the change in interest receivable. The interest income for the year is $4,000. The interest receivable increased from $500 at the beginning of the year to $800 at the end of the year, which means that the actual cash received was less than the interest income recognized. The increase in interest receivable is $300 ($800 - $500). Therefore, the cash received is $4,000 (accrual-basis interest income) - $300 (increase in interest receivable) = $3,700.

The Statement of Profit or Loss of Little Co Shows