The amount 'a' available after 'n' years of a sum 'p' saved now at a rate of interest 'r' is
a= p(1+r)^n
For our case a = 58,800 (1+0.08)^4 = 58,800 x 1.36 = 79,997.
2.
The journal entry to be made on January 1 is
Date Account Debit Credit
Jan.1 Deposit account 58,800
Cash 58,800
(To record deposit made in a savings account)
3. Total interest for four years = Amount available after <u>four years</u> - Initial deposit = $79,997 - $58,800 = $21,297
Interest is the financial charge for the privilege of borrowing money, usually expressed as an annual percentage rate (APR). Interest is the amount of money a lender or financial institution receives for lending out money.
An Interest rate tells you how high the cost of borrowing is, or excessive the rewards are for saving. So, if you're a borrower, the interest rate is the amount you're charged for borrowing money, shown as a percentage of the total amount of the loan.
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