On January 1, 2021, Gundy Enterprises purchases an office building for $250,000, paying $50,000 down and borrowing the remaining $200,000, signing a 8%, 10-year mortgage. Installment payments of $2,426.55 are due at the end of each month, with the first payment due on January 31, 2021.

Record the purchase of the building on January 1, 2021.

Question

Natalya Hines

Business

18 January, 10:15

On January 1, 2021, Gundy Enterprises purchases an office building for $250,000, paying $50,000 down and borrowing the remaining $200,000, signing a 8%, 10-year mortgage. Installment payments of $2,426.55 are due at the end of each month, with the first payment due on January 31, 2021.

Record the purchase of the building on January 1, 2021.

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Destiney Galloway · Answer 1

Dr Office building $250,000

Cr Cash $50,000

Cr Mortgage payable $200,000

Explanation:

The purchase of the building on January 1 2021 implies that the Gundy Enterprises now has an office building in its books of account which is worth $250,000, as a result office building account would be debited with $250,000.

However, cash account would be credited with $50,000 since the business parted with cash of $50,000 while the remaining $200,000 would be credited to mortgage payable account in order to reflect the 10 year obligation in the books of accounts