Financial Accounting
Financial Accounting
10th Edition
ISBN: 9781260481563
Author: Libby, Robert
Publisher: MCGRAW-HILL HIGHER EDUCATION
Question
Book Icon
Chapter 9, Problem 24E

1.

To determine

Provide journal entry for the deposit in savings account at the end of Year 1.

1.

Expert Solution
Check Mark

Explanation of Solution

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Accounting rules for journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Prepare journal entry for the deposit in savings account at the end of Year 1:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account2,000 
 Cash 2,000
 (To record the cash deposited made in savings account at the end of Year1)  

(Table 1)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $2,000.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the asset by $2,000.

2.

To determine

Identify the balance in the savings account at the end of 10th year.

2.

Expert Solution
Check Mark

Explanation of Solution

Future value:

The future value is value of present amount compounded at an interest rate until a particular future date.

 Annuity:

 An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.

Determine the balance in the savings account at the end of 10th year:

Balance amount = Amount deposited ×(Future value of annuity for 10 th year at 9% interest)=$2,000×15.19293=$30,386

Therefore, the balance in the savings account at the end of 10th year is $30,386.

3.

To determine

Identify the interest earned on the 10 deposits.

3.

Expert Solution
Check Mark

Explanation of Solution

Identify the interest earned on the 10 deposits:

Total Interest earned on the 10 deposits }=(Balance amount in saving account at the end of 10th year)(Amount deposited ×Total interest period)=$30,386($2,000×10years)=$30,386$20,000=$10,386

Therefore, the total interest earned on the 10 deposits is $10,386.

4.

To determine

Calculate the amount of interest revenue the fund earned in second year and in third year.

4.

Expert Solution
Check Mark

Explanation of Solution

Calculate the amount of interest revenue the fund earned in second year:

Interest revenue for second year= (Amount deposited in savings account) ×Interest rate=$2,000×9100=$180

 Calculate the amount of interest revenue the fund earned in third year:

Interest revenue for third year= (Amount deposited in savings account in second year+ third year+interest revenue earned during second year) ×Interest rate=($2,000+$2,000+$180)×9100=$4,180×0.09=376

Therefore, the amount of interest revenue earned during the second year is $180 and third year is $376.

5.

To determine

Prepare journal entries at the end of second and third year for the deposit made in savings account.

5.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entry to record entries at the end of the second year:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account2,180 
 Cash 2,000
 Interest revenue  180
 (To record the interest revenue earned end of second year)  

(Table 2)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $2,180.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $2,000.
  • Interest revenue is a component of stockholder’s equity and there is an increase in the value of revenue and equity. Hence, credit the interest revenue by $180.

Prepare journal entry to record the entries at the end of the third year:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account2,376 
 Cash 2,000
 Interest revenue  376
 (To record the interest revenue earned at the end of third year)  

 (Table 3)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $2,376.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $2,000.
  • Interest revenue is a component of stockholder’s equity and there is an increase in the value of revenue and equity. Hence, credit the interest revenue by $376.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 9 Solutions

Financial Accounting

Ch. 9 - Prob. 11QCh. 9 - Prob. 12QCh. 9 - Prob. 13QCh. 9 - 14. Define annuity. Ch. 9 - Prob. 15QCh. 9 - 16. You purchased a new car and promised to pay...Ch. 9 - Prob. 1MCQCh. 9 - Prob. 2MCQCh. 9 - 3. Which of the following best describes accrued...Ch. 9 - Prob. 4MCQCh. 9 - 5. A company is facing a lawsuit from a customer....Ch. 9 - 6. Which of the following transactions would...Ch. 9 - 7. How is working capital calculated? Current...Ch. 9 - 8. The present value of an annuity of $10,000 per...Ch. 9 - Prob. 9MCQCh. 9 - Prob. 10MCQCh. 9 - Prob. 1MECh. 9 - M9-2 Computing and Interpreting Accounts Payable...Ch. 9 - Prob. 3MECh. 9 - Prob. 4MECh. 9 - Prob. 5MECh. 9 - M9-6 Computing Working Capital The balance sheet...Ch. 9 - M9-7 Analyzing the Impact of Transactions on...Ch. 9 - M9-8 Accounting for Long-Term Liabilities:...Ch. 9 - Prob. 9MECh. 9 - M9-10 Computing the Present Value of an...Ch. 9 - Computing the Present Value of a Complex...Ch. 9 - Computing Present Values and Recording Long-Term...Ch. 9 - Identifying Current Liabilities, Computing Working...Ch. 9 - Paul Company completed the salary and wage...Ch. 9 - Computing Payroll Costs; Discussion of Labor...Ch. 9 - Recording a Note Payable through Its Time to...Ch. 9 - E9-5 Determining Financial Statement Effects of...Ch. 9 - Prob. 6ECh. 9 - Calculating and Explaining the Accounts Payable...Ch. 9 - Reporting Notes Payable and Calculating Interest...Ch. 9 - Prob. 9ECh. 9 - Using Working Capital Saks Fifth Avenue’s balance...Ch. 9 - E9-11 Reporting a Long-Term Liability McDonald’s...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing a Present Value An investment will pay...Ch. 9 - Computing a Present Value An investment will pay...Ch. 9 - Computing a Present Value Involving an Annuity and...Ch. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Calculating a Retirement Fund You are a financial...Ch. 9 - Determining an Educational Fund Judge Drago has...Ch. 9 - Prob. 21ECh. 9 - Prob. 22ECh. 9 - Prob. 23ECh. 9 - Prob. 24ECh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - During its first year of operations, Walnut...Ch. 9 - Use the data from Problem P9-4 to complete this...Ch. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - For each of the following transactions, determine...Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - P9-13 (Chapter Supplement B) Recording and...Ch. 9 - Prob. 14PCh. 9 - Prob. 1APCh. 9 - Determining Financial Effects of Transactions...Ch. 9 - Prob. 3APCh. 9 - Calculating and Explaining the Accounts Payable...Ch. 9 - For each of the following transactions, determine...Ch. 9 - Prob. 6APCh. 9 - Prob. 7APCh. 9 - Prob. 8APCh. 9 - Prob. 1CONCh. 9 - Prob. 1CPCh. 9 - Prob. 2CPCh. 9 - Prob. 3CPCh. 9 - Prob. 4CPCh. 9 - Prob. 5CP
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education