Fixed Asset Purchases with Note On June 30, Beahm Management Company purchased l

Question

Fixed Asset Purchases with Note

On June 30, Beahm Management Company purchased land for $250,000 and a building for $350,000, paying $300,000 cash and issuing an 8% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $15,000 on the principal plus the interest accrued from the date of the preceding payment.

For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".

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a. Journalize the entry to record the transaction on June 30.



June 30
Building ___________________ __________0___________

Land ___________________ __________0___________

Note Payable _________0__________ _____________________

Cash _________0__________ _____________________







b. Journalize the entry to record the payment of the first installment on December 31.



Dec. 31

Note Payable _________________ __________0__________

Interest Expense ________________ __________0__________

Cash ________0________ ____________________








c. Journalize the entry to record the payment of the second installment the following June 30.



June 30

Note payable ___________________ _________0__________

Interest Expense ___________________ __________0_________

Cash _________0__________ ___________________



Thank you.

Explanation / Answer

a. Journalize the entry to record the transaction on June 30. Land DEBIT 250000 Building DEBIT 350000 Cash CREDIT 300000 Note payable 300000 b. Journalize the entry to record the payment of the first installment on December 31. Interest expense DEBIT 12000 ((300000*.08)/12*6) Note Payable DEBIT 3000 (15000-12000) Cash CREDIT 15000 c. Journalize the entry to record the payment of the second installment the following June 30. Interest expense DEBIT 11880 ((297000*.08)/12*6) Note payable DEBIT 3120 Cash CREDIT 15000

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