Kahl Company purchased a building and land with a fair market value of $ 400 000 (building, $ 225000 and land, $ 175000) on January 1, 2018. Kahl signed a 15-year, 5% mortgage payable. Kahl will make monthly payments of $ 3 163.17. Round to two decimal places. Explanations are not required for journal entries.
Requirements
1. |
Journalize the mortgage payable issuance on January 1,
2018. |
2. |
Prepare an amortization schedule for the first two payments. |
3. |
Journalize the first payment on January 31,
2018. |
4. |
Journalize the second payment on February 28,
2018. |
Journal entry :
Date | account and explanation | debit | credit |
Jan 1 | Land | 175000 | |
Building | 225000 | ||
Mortgage note payable | 400000 |
Prepare an amortization schedule for the first two payments.
Installment | Interest expense | Principal payment | Ending balance | |
Jan 1 | 400000 | |||
Jan 31 | 3163.17 | 400000*5%*1/12 = 1666.67 | 1496.50 | 398503.50 |
Feb 28 | 3163.17 | 1660.43 | 1502.74 | 397000.76 |
3) Journal entry
Date | account and explanation | debit | credit |
Jan 31 | Interest expense | 1666.67 | |
Mortgage payable | 1496.50 | ||
Cash | 3163.17 |
4) Journal entry
Date | account and explanation | debit | credit |
Feb 28 | Interest expense | 1660.43 | |
Mortgage payable | 1502.74 | ||
Cash | 3163.17 |
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