Loan Money – Accrue Monthly Interest – Collect Interest On July 1, 2021, MegaMoney, Inc. loaned money to ShortOfCash company (SOC). MegaMoney had SOC sign a note for the loan. The following are the terms and other information pertaining to the loan: Amount of the loan ........................................................................ $750,000 How long the loan is for (the term of the loan) ............................... 1 year Date the loan was made ................................................................ July 1, 2021 Date when interest will first be received by MegaMoney ............... September 30, 2021 Amount of interest earned by MegaMoney for July ........................ $3,825 Amount of interest earned by MegaMoney for August ................... $3,825 Amount of interest earned by MegaMoney for September ............. $3,710 The following is a partial list of the accounts in MegaMoney’s General Ledger. These are the only accounts you need for this problem. Cash Note Receivable (see below for a definition of this account) Interest Receivable (see below for a definition of this account) Interest Revenue (revenue account) Note Receivable account – An asset account that tracks the amount owed to the entity (MegaMoney) by another company (SOC). This asset results from the entity making a loan to the other company and the other company signing a Note. The normal balance is a debit. Interest Receivable account – An asset account that tracks the amount of interest owed to the entity (MegaMoney) by another company (SOC). The normal balance is a debit. Use the forms on Tab .8-3. in the Excel workbook Chapter 08 b - Problem 8-1 to 8-4 Forms to complete this problem. Note: You are recording the transactions in MegaMoney’s accounting system. Requirement 1 Prepare the July 1, 2021 General Journal entry to record the loan MegaMoney made to SOC. Hint: MegaMoney gave out the asset Cash. MegaMoney got in the asset Note Receivable. Requirement 2 Prepare the July 31, 2021 General Journal adjusting entry to increase the Interest Receivable account by the amount of interest MegaMoney earned on the Note Receivable for July. Requirement 3 Prepare the August 31, 2021 General Journal adjusting entry to increase the Interest Receivable account by the amount of interest MegaMoney earned on the Note Receivable for August.
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.
8-3
Loan Money – Accrue Monthly Interest – Collect Interest
On July 1, 2021, MegaMoney, Inc. loaned money to ShortOfCash company (SOC). MegaMoney
had SOC sign a note for the loan. The following are the terms and other information pertaining to
the loan:
Amount of the loan ........................................................................ $750,000
How long the loan is for (the term of the loan) ............................... 1 year
Date the loan was made ................................................................ July 1, 2021
Date when interest will first be received by MegaMoney ............... September 30, 2021
Amount of interest earned by MegaMoney for July ........................ $3,825
Amount of interest earned by MegaMoney for August ................... $3,825
Amount of interest earned by MegaMoney for September ............. $3,710
The following is a partial list of the accounts in MegaMoney’s General Ledger. These are the only
accounts you need for this problem.
Cash
Note Receivable (see below for a definition of this account)
Interest Receivable (see below for a definition of this account)
Interest Revenue (revenue account)
Note
(MegaMoney) by another company (SOC). This asset results from the entity making a loan
to the other company and the other company signing a Note. The normal balance is a debit.
Interest Receivable account – An asset account that tracks the amount of interest owed to
the entity (MegaMoney) by another company (SOC). The normal balance is a debit.
Use the forms on Tab .8-3. in the Excel workbook Chapter 08 b - Problem 8-1 to 8-4 Forms to
complete this problem.
Note: You are recording the transactions in MegaMoney’s accounting system.
Requirement 1
Prepare the July 1, 2021 General
Hint: MegaMoney gave out the asset Cash. MegaMoney got in the asset Note Receivable.
Requirement 2
Prepare the July 31, 2021 General Journal
account by the amount of interest MegaMoney earned on the Note Receivable for July.
Requirement 3
Prepare the August 31, 2021 General Journal adjusting entry to increase the Interest
Receivable account by the amount of interest MegaMoney earned on the Note Receivable for
August.
Requirement 4
Prepare the September 30, 2021 General Journal entry to record the receipt of cash by
MegaMoney from SOC for the July, August, and September interest.
Hint: The account names have been put in the General Journal.
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