FINANCIAL ACCOUNTING (LOOSELEAF)
FINANCIAL ACCOUNTING (LOOSELEAF)
10th Edition
ISBN: 9781260481358
Author: Libby
Publisher: MCG
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Chapter 9, Problem 23E

1.

To determine

Identify the amount that will be available in the four years.

1.

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.

Identify the amount that will be available in the four years:

Futurevalue} = Invested (present)value × (Future value factorof $1 at interest rate for time periods)=$58,800×1.36049=$79,997

Therefore, the amount that will be available in the four years is $79,997.

2.

To determine

Prepare journal entry that Mr. A should make on January 30.

2.

Expert Solution
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Explanation of Solution

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account58,800 
 Cash 58,800
 (To record the cash deposited by Mr. A in savings account)  

(Table 1)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $58,800.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the asset by $58,800.

3.

To determine

Compute the total interest for four years.

3.

Expert Solution
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Explanation of Solution

Compute the total interest for four years:

Total interest for four years }(Amount available in four years)  (Amount deposited in savings account)=$79,997$58,800=$21,197

Therefore, the total interest for four years is $21,197.

4.

To determine

Provide the journal entry that Mr. A should make on (a) December 31 of the first year (b) December 31 of second year.

4.

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 to record that Mr. A should make on December 31 of first year:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account4,704 
 Interest revenue (1) 4,704
 (To record the interest revenue earned during December 31 in first year for deposit made)  

(Table 2)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $4,704.
  • 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 $4,704.

Working Note:

Interest revenue= (Amount deposited in savings account) ×Interest rate=$58,800×8100=$4,704        (1)

Prepare journal entry to record that Mr. A should make on December 31 of second year:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 Savings Account5,080 
 Interest revenue (2) 5,080
 (To record the interest revenue earned during December 31in second year for deposit made)  

(Table 3)

  • Savings account is an asset and there is an increase in the value of an asset. Hence, debit the savings account by $5,080.
  • 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 $5,080.

Working Note:

Interest revenue in second year}(Amount deposited in savings account+Interest earned during first year) ×Interest rate=($58,800+$4,704)×8100=$63,504×8100=$5,080        (2)

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Chapter 9 Solutions

FINANCIAL ACCOUNTING (LOOSELEAF)

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
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