When the amount of interest receivable decreases during an accounting period:
A) Accrual-basis interest revenue exceeds cash collection from borrowers.
B) Accrual-basis net income exceeds cash-basis net income.
C) Accrual-basis interest revenue is less than cash collection from borrowers.
D) Accrual-basis net income is less than cash-basis net income.

Question

Quizplus · Accepted Answer

When the amount of interest receivable decreases during an accounting period, it means that the amount of cash collected from borrowers is more than the interest revenue recognized on an accrual basis. This results in a situation where the accrual-basis interest revenue is less than the cash collection from borrowers. Therefore, option C is the correct answer.

When the Amount of Interest Receivable Decreases During an Accounting