Explanation:
The computations are shown below:
a. Interest income for the year 1
= $16,000 × 8% × 8 months ÷ 12 months
= $853
b. Total amount of receivable
= Loan amount + interest income
= $16,000 + $853
= $16,853
c. The loan amount would be reported under the investing activities as a negative sign i.e $16,000 and the interest income is not shown anywhere in the cash flow statement
d. Interest income for the year 2
= $16,000 × 8% × 4 months ÷ 12 months
= $427
e. Total amount of cash collection in the year 2
= Loan amount + interest income for year 1 + interest income for year 2
= $16,000 + $853 + $427
= $17,280
f. The loan amount would be reported under the investing activities as a positive sign i.e $16,000 and the cash collection i.e $17,280 is shown under the cash flow provided by operating activities
g. Total amount of interest earned is
= $427 + $853
= $1,280
