Question

My company that i did in the last discussion was Target store, please keep this in mind. there is an example below in the last picture.

Discussion 2 (part of chapter 3's work) Available on Saturday, September 12, 2020 6:00 AM EDT until Sunday, September 27, 2020 11:59 PM EDT Subscribe We have learned about four types of adjustments: (1) deferred expenses, (2) deferred revenues, (3) accrued revenues, and (4) accrued expenses. Using the same service business that you identified in Discussion 1, describe one specific adjusting entry that your business might make. Requirements: Initial post: • Write an initial discussion post with the following information: • The name of your company and the type of the adjusting entry you will discuss. Do not use a wage accrual as that is the example I provided, below. • A description of the adjusting entry and why your company might need to make it. • Record the entry, in the proper journal entry format, including the dates, account titles, debit and credit amounts. Hint: Use the table format in the bar above to format your journal entry • If there was an initial entry in another period, provide that as well. Replies: • Reply to at least two of your fellow class mates, who selected a different adjusting entry

Answer 1

The following is an example for Target Store :

As in general practice, the store invested in Fixed Deposits on 1st July 2020 for an amount of $100,000 and Interest on such deposit being 8% per annum. As the deposit yields interest annually it will be paid on 30th June 2020. However the interest will be accrued for the period starting from July 2020 to December 2020. Hence it is required to book the interest of $4000 ($100,000*8%*6/12) pertaining to the period starting from July 2020 to December 2020 on 31st December 2020.

This is an example of accrued income. The interest needs to be booked for the period it has accrued as the books are predominantly maintained on accrual basis.

The adjustment entry to be passed is :

12/31/2020  

Interest Receivable A/c $4000

Interest received A/c. $4000

Once the above entry is posted, the current asset will increase by $4000 denoting there is an accrued interest Receivable from the Fixed Deposits.

Also they had an additional income from the interest Receivable for the year 2020.