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1.
Provide
1.
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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 Year 1:
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
Savings Account | 2,000 | ||
Cash | 2,000 | ||
(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.
Identify the balance in the savings account at the end of 10th year.
2.
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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
Determine the balance in the savings account at the end of 10th year:
Therefore, the balance in the savings account at the end of 10th year is $30,386.
3.
Identify the interest earned on the 10 deposits.
3.
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Explanation of Solution
Identify the interest earned on the 10 deposits:
Therefore, the total interest earned on the 10 deposits is $10,386.
4.
Calculate the amount of interest revenue the fund earned in second year and in third year.
4.
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Explanation of Solution
Calculate the amount of interest revenue the fund earned in second year:
Calculate the amount of interest revenue the fund earned in third year:
Therefore, the amount of interest revenue earned during the second year is $180 and third year is $376.
5.
Prepare journal entries at the end of second and third year for the deposit made in savings account.
5.
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Explanation of Solution
Prepare journal entry to record entries at the end of the second year:
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
Savings Account | 2,180 | ||
Cash | 2,000 | ||
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 third year:
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
Savings Account | 2,376 | ||
Cash | 2,000 | ||
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
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