[Oimie]

https://oi60.tinypic.com/33bfoz9.jpg

I picked D but the answer key says it’s C. The explanation doesn’t even seem to be talking about year 2.

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016

[nika_cpa]

how did you get answer D? Accrued interest is the interest that was earned in year 2, but will be received in year 3. Interest amount is based on principal's balance. SO the answer C is correct.

Becker self-study, Wiley Test Bank and books, Becker final review. NINJA MCQ bank and NINJA notes for BEC only!

AUD - PASSED!
FAR - PASSED!
REG - PASSED!
BEC - PASSED!

[excel monkey]

@nika_cpa – How did you get answer C?

It looks like a typo in the question to me. In the question itself, they ask for interest receivable on June 30 YEAR 2, but in the explanation they tell you how to calculate the interest receivable at June 30 YEAR 3. Interest receivable on the note at June 30 YEAR 2 is 12,000. As of June 30 year 2, no payments had been made – not due until July 1 – so the accrued interest is 150,000 * 8%, or 12,000. On July 1 Year 2, the company will receive a check for 62,000 (50,000 principal payment and 12,000 in interest). On the June 30 YEAR 3 balance sheet, interest receivable of 8,000 (150,000 – 50,000 principal payment on 7/1/Year 2 * 8%) would be reported.

Interest receivable on June 30,

Year 2 – 12,000 (150,000 * 8%)

Year 3 – 8,000 (100,000 * 8%)

Year 4 – 4,000 (50,000 * 8%)

FAR - 91
AUD - 88
BEC - 86
REG - 79

[Oimie]

@excel monkey: Thank you. I needed to see if I am understanding the problem correctly.

@nika_cpa: excel monkey pretty much explained how I got answer D.

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016

[mw798]

The correct answer is D. The first payment of principal and interest has not been received yet so interest of $12,000 is sitting as a receivable on June 30, year 2.

[Author]

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