How does John Deere account for the loans it makes to farmers for the purchase of tractors and crop supplies? Deere & Company (NYSE: DE), otherwise known as John Deere, manufactures and sells tractors and other farm equipment. For the past several years, it has been difficult for farmers to get bank loans for planting crops and for purchasing large, expensive farm equipment. Deere has stepped in to fill the gap in agricultural financing - Deere makes loans to farmers. One type of loan Deere makes to farmers is to finance the purchase of farm equipment, In exchange for the farm equipment they are buying from Deere, farmers will make a cash down payment and sign a promissory note with Deere. Another type of loan Deere makes to farmers is to finance crop supplies. Farmers can go to Deere for cash loans to purchase crop supplies, including seeds, fertilizer, and chemicals. Farmers will sign a promissory note with Deere and will receive a cash which they can then use to purchase the crop supplies. Deere & Company is the fifth largest agricultural lender in the United States (Wells Fargo is the top agricultural lender.) Discussion Questions 1. How would Deere's assets, liabilities, and equity be impacted when Deere sells farm equipment to a farmer in exchange for a promissory note and a cash down payment? What specific accounts will be affected? Will each of these accounts be increased or decreased? How will the financial statements be affected? 2. How would Deere's assets, liabilities, and equity be impacted when Deere makes a cash loan to a farmer? What specific accounts will be affected? Will each of these accounts be increased or decreased? How will the financial statements be affected? 3. When a farmer makes a loan payment to Deere, what general ledger accounts will be impacted? Will these accounts increase or decrease? How will the financial statements be affected?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
1. The sales of the company will be on a positive note. In the books of the company this will lead to good revenue till the credit sales are realized. During this process, the short term assets and long term liability or equity are increased.
As the farmer gets the farm equipment in exchange for a promissory note and a cash down payment, the cash account and debtors accounts are affected. Both the accounts will witness an increase in credit balance.
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