Your company has loaned money to an outside entity. You earned the monthly interest on the loan but did not receive the payment yet. The payment is expected to be received next month. To capture the interest expected to be received in the future you have created account #901 , Interest Receivable in your chart of accounts and booked the journal entry to DR: Interest Receivable and CR: Interest Income. While the basic journal entry was correct, your manager is questioning how you setup this new account. Based on this image of the chart of accounts below what needs to be corrected and how would you correct this?
Your company has loaned money to an outside entity. You earned the monthly interest on the loan but did not receive the payment yet. The payment is expected to be received next month. To capture the interest expected to be received in the future you have created account #901 , Interest Receivable in your chart of accounts and booked the journal entry to DR: Interest Receivable and CR: Interest Income. While the basic journal entry was correct, your manager is questioning how you setup this new account. Based on this image of the chart of accounts below what needs to be corrected and how would you correct this?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Your company has loaned money to an outside entity. You earned the monthly interest on the loan but did not receive the payment yet. The payment is expected to be received next month. To capture the interest expected to be received in the future you have created account #901 , Interest Receivable in your chart of accounts and booked the
Transcribed Image Text:Number
Name
Туре
Detail Type
133
133 Supplies On Hand
Other Current Assets
Prepaid Expenses
135
135 Prepaid Insurance
Other Current Assets
Prepaid Expenses
136
136 Prepaid Rent
Other Current Assets
Prepaid Expenses
138
138 Other Prepaid Expenses
Other Current Assets
Prepaid Expenses
150
150 Undeposited funds
Other Current Assets
Undeposited Funds
180
180 Computer Equipment
Fixed Assets
Machinery & Equipment
182
182 Office Furniture & Equipment Fixed Assets
Machinery & Equipment
184
184 Computer Software
Fixed Assets
Fixed Asset Software
189
189 Accumulated Depreciation
Fixed Assets
Accumulated Depreciation
195
195 Security Deposit
Other Assets
Security Deposits
901
901 Interest Receivable
Other Assets
Other Long-term Assets
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