Question

On June 30, Collins Management Company purchased land for $420,000 and a building for $580,000, paying...

On June 30, Collins Management Company purchased land for $420,000 and a building for $580,000, paying $340,000 cash and issuing a 4% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $33,000 on the principal plus the interest accrued from the date of the preceding payment.

Journalize the entry to record (a) the transaction on June 30, (b) the payment of the first installment on December 31, and (c) the payment of the second installment the following June 30. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSCollins Management CompanyGeneral Ledger

ASSETS
110 Cash
111 Accounts Receivable
112 Interest Receivable
113 Notes Receivable
115 Inventory
116 Supplies
118 Prepaid Insurance
120 Land
123 Building
124 Accumulated Depreciation-Building
125 Office Equipment
126 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
213 Interest Payable
214 Notes Payable
215 Salaries Payable
216 Social Security Tax Payable
217 Medicare Tax Payable
218 Employees Federal Income Tax Payable
219 Employees State Income Tax Payable
221 Retirement Savings Deductions Payable
224 Federal Unemployment Tax Payable
225 State Unemployment Tax Payable
226 Vacation Pay Payable
227 Unfunded Pension Liability
228 Product Warranty Payable
229 EPA Fines Payable
230 Litigation Claims Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Goods Sold
520 Salaries Expense
524 Depreciation Expense-Building
525 Delivery Expense
526 Repairs Expense
529 Selling Expenses
531 Rent Expense
532 Depreciation Expense-Office Equipment
533 Insurance Expense
534 Supplies Expense
535 Payroll Tax Expense
536 Vacation Pay Expense
537 Pension Expense
538 Cash Short and Over
539 Product Warranty Expense
540 Damage Awards and Fines
541 Miscellaneous Expense
710 Interest Expense

Scroll down to access pages 2 through 3 of the journal.

a. Journalize the entry to record the transaction on June 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

2

3

4

b. Journalize the entry to record the payment of the first installment on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 2

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

2

3

c. Journalize the entry to record the payment of the second installment the following June 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 3

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

2

3

Homework Answers

Answer #1
Date Account Titles and Explanation Debit Credit
June 30 Land $ 420,000
Building $ 580,000
            Cash $ 340,000
          Notes Payable   - Bal. Fig. $ 660,000
(To record the purchase )
December 31 Notes Payable $ 33,000
Interest Expense
($ 660,000 x 4% x 6/12)
$ 13,200
              Cash - Bal. Fig. $ 46,200
(To record first installment payment )
June 30, Notes Payable $ 33,000
Interest Expense
($ 660,000 (-) $ 33,000 ) x 4% x 6/12)
$ 12,540
   Cash ($14250 + 30000) $ 45,540
(To record second installment payment )
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