Question

Ember Company purchased a building with a market value of $280,000 and land with a market value of $55,000 on January 1, 2018. Ember Company paid $15,000 cash and signed a 25-year, 12% 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.)

Answer 1

A. Jan,1

Dr Building $280,000

Dr Land $55,000

Cr Mortgages payable $320,000

Cr Cash $15,000

B. Dr Mortgages payable $170

Dr Interest expense $3,200

Cr Cash $3,370

Step-by-step explanation:

A. Preparation of the journal entry for January 1,2018 purchase

Jan,1

Dr Building $280,000

Dr Land $55,000

Cr Mortgages payable $320,000

($280,000+$55,000-$15,000)

Cr Cash $15,000

(To record Purchased building and land with a mortgage payable)

B. Preparation of the journal entry for the first monthly payment of $3,370 on January 31, 2018

Dr Mortgages payable $170

($3,370-$3,200)

Dr Interest expense $3,200

($320,000*12%*1month/12)

Cr Cash $3,370

(To pay the interest and annual installment)