Answer:
1. A. Dr Cash 50,000
Cr Customers Saving Account 50,000
B.Dr Interest Expense 125
Cr Cash 125
C. Dr Loan Receivables 50,000
Cr Cash 50,000
D. Dr Interest Receivables 750
Cr Interest Income 750
2. $625
Explanation:
Answer and Explanation:
1. Preparation of journal entries
a. In a situation where A customer made deposits of the amount of $50,000 in WaMu savings account on 1/1/2006 the Journal entry will be:
Dr Cash 50,000
Cr Customers Saving Account 50,000
(Being to record the deposit from customers)
b. In a situation where WaMu pays a 1% as annual interest on the deposit on 3/31/06 the journal entry will be:
Dr Interest Expense 125
(50,000*1%*3/12)
Cr Cash 125
(Being to record the payment of interest Expense)
c. In a situation where WaMu lends out the
amount of $50,000 to another customer the Journal entry will be:
Dr Loan Receivables 50,000
Cr Cash 50,000
(Being to record the receivable lent to customers)
d. In a situation where WaMu accrues interest on this date 3/31/06 the journal entry will be:
Dr Interest Receivables 750
(50,000*6%*3/12)
Cr Interest Income 750
(Being to record the interest accrued)
2. Calculation for How much net interest income (profit) did WaMu earn in the first quarter
First step is to calculate the Net Interest Rate
Interest Rate on Receivables 6%
Less Interest Rate on Payable 1%
Net Interest Rate 5%
Second Step will be to calculate the Annual Net Interest
Using this formula
Annual Net Interest=Principal *Net Interest Rate
Let plug in the formula
Annual Net Interest=50,000*5%
Annual Net Interest= 2,500
Last step is to calculate the first quarter net interest income
Using this formula
First quarter net interest income=Time*Annual Net Interest
Let plug in the formula
First quarter net interest income= 3/12*2,500
First quarter net interest income= $625
Therefore the First quarter net interest income will be $625
