On August 1, Year 1 Hernandez Company loaned $48,000 cash to Acosta Company. The one-year note carried a 5% rate of interest. Which of the following shows how the accrual of interest revenue in Year 2 will effect Hernandez’s financial statements?

	Balance sheet					Income Statement					Statement of Cash Flows
	Assets	=	Liab.	+	Equity	Rev.	−	Exp.	=	Net Inc.
A.	1,400	=	NA	+	1,400	1,400	−	NA	=	1,400	NA
B.	1,400	=	NA	+	1,400	1,400	−	NA	=	1,400	1,400 OA
C.	1,000	=	NA	+	1,000	1,000	−	NA	=	1,000	NA
D.	1,000	=	NA	+	1,000	1,000	−	NA	=	1,000	2,400 OA

Multiple Choice

• Option A

• Option B

• Option C

• Option D