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Q19E_3

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 659

Short Answer

Preparing an amortization schedule and recording mortgages payable

entries

Kellerman Company purchased a building and land with a fair market value of

$550,000 (building, $425,000, and land, $125,000) on January 1, 2018. Kellerman

signed a 20-year, 6% mortgage payable. Kellerman will make monthly payments of

$3,940.37. Round to two decimal places. Explanations are not required for journal

entries.

Requirements

1. Journalize the mortgage payable issuance on January 1, 2018.

2. Prepare an amortization schedule for the first two payments.

3. Journalize the first payment on January 31, 2018.

4. Journalize the second payment on February 28, 2018.

The mortgage payable account and interest expense account is debited with $1,190.37 and $2,750.

See the step by step solution

Step by Step Solution

Step 1: Definition of journal entry

Journal entry is the entry which are made by the company to record the financial event or transaction took place in company.

Step 2: Journal entry of the payment

Date

Particular

Debit

Credit

January 31, 2018

Mortgage Payable

$1,190.37

Interest Expense

$2,750

Cash

$3,940.37

(Being entry to record the first payment)

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