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

Question

Fixed Asset Purchases with Note On June 30, Collins Management Company purchased land for S240 000 and a biding for S360 000, paying $300,000 cash and issuing a 9% 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 If an amount box does not require an entry, leave it blank a. Journalize the entry to record the transaction on June 30 June 30 Building . ??? Land Notes Payable Cash Check My Work Determine what the compeny is acquiring and how they are paying for this purchase Learning Objective 1 b. Journalize the entry to record the payment of the first installment on December 31 Dec. 31 -etes Payable Interest Expense Cash

Explanation / Answer

Collin Management Company

Journal Entries

Date

Description

Debit

Credit

Jun 30

Building

360000

Land

240000

       Notes Payable

720000

       Cash

300000

Dec 31

Notes Payable

36000

Interest Expenses (720000*9%*9/12)

48600

       Cash

84600

Jun 30

Notes Payable

36000

Interest Expenses ((720000-300000)*9%*9/12)

28350

       Cash

64350

Collin Management Company

Journal Entries

Date

Description

Debit

Credit

Jun 30

Building

360000

Land

240000

       Notes Payable

720000

       Cash

300000

Dec 31

Notes Payable

36000

Interest Expenses (720000*9%*9/12)

48600

       Cash

84600

Jun 30

Notes Payable

36000

Interest Expenses ((720000-300000)*9%*9/12)

28350

       Cash

64350

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