Question

Record and analyze installment notes (LO9-2)

[The following information applies to the questions displayed below.]
On January 1, 2021, Stoops Entertainment purchases a building for $420,000, paying $100,000 down and borrowing the remaining $320,000, signing a 7%, 20-year mortgage. Installment payments of $2,480.96 are due at the end of each month, with the first payment due on January 31, 2021. Problem 9-1B Part 1 Required: 1. Record the purchase of the building on January 1, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Required information Journal entry worksheet Record the purchase of the building. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2021.

Answer 1

January 1, 2021, building purchased

Dr Building 420,000

Cr Cash 100,000

Cr Notes payable 320,000

Step-by-step explanation:

The building account (asset) must be recorded at the purchase cost. The mortgage is considered a note payable (long term liability), while the cash account (asset) decreases, therefore, it must be credited.