Question

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.

Answer 1

Dr Office building $250,000

Cr Cash $50,000

Cr Mortgage payable $200,000

Step-by-step 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