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28 May, 08:30

Elie Company purchased a building with a market value of $ 295 comma 000 and land with a market value of $ 45 comma 000 on January 1, 2018. Elie Company paid $ 40 comma 000 cash and signed a 20 -year, 6 % mortgage payable for the balance.

Requirements:

1. JournalizetheJanuary1,2018, purchase.

2. Journalize the first monthly payment of $3,370 on January 31, 2018. (Round to the nearest dollar.)

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Answers (1)
  1. 28 May, 08:47
    0
    1) Jan 1

    Dr Building $295,000

    Dr Land $45,000

    Cr Mortgages Payable 300,000

    Cr Cash $40,000

    2)

    Jan. 31

    Dr Mortgages Payable $1870

    Dr Interest Expense $1,500

    Cr Cash3,370

    Explanation:

    1) Journal entries

    Jan. 1

    Dr Building $295,000

    Dr Land $45,000

    Cr Mortgages Payable 300,000

    ($295,000+$45,000=$340,000-$40,000

    =$300,000)

    Cr Cash $40,000

    Purchased building and land with mortgages payable and cash payment.

    2)

    Jan. 31

    Dr Mortgages Payable ($3,370 - $1,500) $1870

    Dr Interest Expense (300,000 * 0.06 * 1/12) $1,500

    Cr Cash3,370

    Paid principal and interest payment
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