Financial Accounting, 8th Edition
Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
Question
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Chapter 9, Problem 24E

1.

To determine

Provide journal entry for the deposit in savings account at the end of 2014.

1.

Expert Solution
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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 2014:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

Savings Account2,000
Cash2,000
(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
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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.

Identify 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
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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 during the year 2015 and 2016.

4.

Expert Solution
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Explanation of Solution

Calculate the amount of interest revenue the fund earned during the year 2015:

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 during the year 2016:

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 year 2015 is $180 and 2016 is $376.

5.

To determine

Prepare journal entries at the end of 2015 and 2016 for the deposit made in savings account.

5.

Expert Solution
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Explanation of Solution

Prepare journal entry to record entries at the end of the year 2015:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

Savings Account2,180
Cash2,000
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 year 2016:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

Savings Account2,376
Cash2,000
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.

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Chapter 9 Solutions

Financial Accounting, 8th Edition

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