Question

On September 1, Year 1 Western Company loaned $36,000 cash to Eastern Company. The one-year note carried a 5% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western’s December 31, Year 1 financial statements would be ______

Answer 1

Answer: $600 interest revenue and $0 cash flow from operating activities

Step-by-step explanation:

Simple interest = PRT/100

P= $36,000 R= 5% per annum

T = sept to dec = 4months = 4/12years

Interest revenue = ($36,000 × 5% × (4/12))/100 = $600

Cash flow from operating activities = $0

Because there is no cash flow yet since it's just 4months into the yearly (12months) loan.