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

Question

Quizplus · Accepted Answer

If the amount of interest receivable decreases during an accounting period, it means that the cash collections from borrowers exceed the interest revenues recognized on the accrual basis. Therefore, the accrual-basis interest revenues are less than the cash collections from borrowers. This would result in a lower accrual-basis net income compared to cash-basis net income.

When the Amount of Interest Receivable Decreases During an Accounting