On January 1, 2018, Gundy Enterprises purchases an office for $283,000, paying $

Question

On January 1, 2018, Gundy Enterprises purchases an office for $283,000, paying $53,000 down and borrowing the remaining $230,000, signing a 8%, 10-year mortgage. Installment payments of $2,790.53 are due at the end of each month, with the first payment due on January 31, 2018.

Problem 9-1A Part 1

Required:

1. Record the purchase of the building on January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Problem 9-1A Part 2

2. Complete the first three rows of an amortization schedule. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Problem 9-1A Part 3

Required:

3-a. Record the first monthly mortgage payment on January 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

3-b. How much of the first payment goes to interest expense and how much goes to reducing the carrying value of the loan? (Round your answers to 2 decimal places.)

Problem 9-1A Part 4

4. Total payments over the 10 years are $334,864 ($2,790.53 × 120 monthly payments). How much of this is interest expense and how much is actual payment of the loan?

No Date General Journal Debit Credit 1 January 01, 2018 Buildings 283,000 Cash 53,000 Notes payable 230,000

Explanation / Answer

2)

Date

Cash paid

Interest expense

Decrease in carrying value

Carrying value

01/01/18

230000

01/31/18

2790.53

230000*8%*1/12 = 1533.33

2790.53-1533.33 = 1257.2

230000- 1257.2 = 228742.80

02/28/18

2790.53

228742..8*8%*1/12 = 1524.95

2790.53 -1524.95 = 1265.58

228742.80 - 1265.58 = 227477.22

3a)

January 31,018:

Interest expense Dr 1533.33

Note Payable Dr 1257.20

Cash Cr 2790.53

3b)

Interest expense = 1533.33

Reducing the carrying value = 1257.20

4)

Actual payment of the loan = 230000

Interest expense = 334864 – 230000 =104864

Date

Cash paid

Interest expense

Decrease in carrying value

Carrying value

01/01/18

230000

01/31/18

2790.53

230000*8%*1/12 = 1533.33

2790.53-1533.33 = 1257.2

230000- 1257.2 = 228742.80

02/28/18

2790.53

228742..8*8%*1/12 = 1524.95

2790.53 -1524.95 = 1265.58

228742.80 - 1265.58 = 227477.22

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.