Question

Exercise 7-12A Notes receivable-accrued interest LO 7-5 On May 1, Year 1, Benz’s Sandwich Shop loaned $12,000 to Mark Henry for one year at 9 percent interest.

Required

a. What is Benz’s interest income for Year 1?

b. What is Benz’s total amount of receivables at December 31, Year 1?

c. How will the loan and interest be reported on Benz’s Year 1 statement of cash flows?

d. What is Benz’s interest income for Year 2?

e. What is the total amount of cash that Benz’s will collect in Year 2 from Mark Henry?

f. How will the loan and interest be reported on Benz’s Year 2 statement of cash flows?

g. What is the total amount of interest that Benz’s earned on the loan to Mark Henry? (For all requirements, round your answers to the nearest dollar amount.)

a. interest income
b. receivables
c.
d. interest income
e.cash
f.
g. interest earned

Answer 1

Paticulars	Amount
a) Interest Income year 1 = 12000*9%*8/12	720
b)
Total Amount of receivables year 1 = 12000 + 720	12720
c)
Cash used in investing activities	(12,000)
d)
Interest Income year 2 = 12,000*9%*4/12	360
e)
Cash =12,000 + 720 + 360	13080
f)
Cash provided by investing activities	12000
Cash provided by operating activities	1080
g) Total Interest = 720+360	1080