Apollo sends out an Earnest money deposit of $10,000 for 123 Dragon way on Decem
ID: 2725713 • Letter: A
Question
Apollo sends out an Earnest money deposit of $10,000 for 123 Dragon way on December 31, 2015. Apollo purchased 123 Dragon way on March 1, 2016 in the amount of $470,000. The property was leveraged with an 80% loan from Anchor Capital with 8% financing and 1% points paid up front. Apollo's financing costs are 12% per year on funds not secured by an actual property in inventory. Please calculate interest where applicable and make journal entries reflecting all activity relating to this transaction. Please be sure to date, label and be clear which financial statement your entries/accounts belong to.
Explanation / Answer
Journal entries in the books of Apollo:
Date
Particulars
Debit
credit
Dec. 31,
2015
123 Dagon Way
Cash
(Bing advance paid)
$10,000
$10,000
March 31, 2016
Cash
8%, Anchor Capital Term loan
(being loan taken from Anchor Capital)
$376,000
376,000
March 31, 2016
123 Dragon Way
Cash
(being balance amount paid on purchase of property)
$460,000
$460,000
March 31, 2016
Up-front charges (123 Dragon Way)
Cash $470,000×0.80×0.01)
(being up front charges on loan paid)
$3,760
$3,760
Accounts classification between income statement and balance sheet:
Cash belongs to Balance Sheet
123 Dragon Way is a property, which belongs to Balance Sheet
Up-front charges belongs to Income Statement
Advance belongs to Balance sheet
Anchor Capital belongs to balance sheet
Date
Particulars
Debit
credit
Dec. 31,
2015
123 Dagon Way
Cash
(Bing advance paid)
$10,000
$10,000
March 31, 2016
Cash
8%, Anchor Capital Term loan
(being loan taken from Anchor Capital)
$376,000
376,000
March 31, 2016
123 Dragon Way
Cash
(being balance amount paid on purchase of property)
$460,000
$460,000
March 31, 2016
Up-front charges (123 Dragon Way)
Cash $470,000×0.80×0.01)
(being up front charges on loan paid)
$3,760
$3,760
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