Question

Kahl Company purchased a building and land with a fair market value of $ 400 000...

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.
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Answer #1

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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