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Q2SE_1

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Horngren'S Financial And Managerial Accounting
Found in: Page 655

Short Answer

Accounting for mortgages payable

Ember Company purchased a building with a market value of $280,000 and land with

a market value of $55,000 on January 1, 2018. Ember Company paid $15,000 cash and

signed a 25-year, 12% mortgage payable for the balance.

Requirements

1. Journalize the January 1, 2018, purchase.

2. Journalize the first monthly payment of $3,370 on January 31, 2018. (Round to the

nearest dollar.)

  1. The building and land is debited with the amount of $280,000 and $55,000. Cash and mortagages payable is creadited with $15,000 and $320,0000
  2. The mortgages payable is debited with $3,370 and cash account is credited with $3,370.
See the step by step solution

Step by Step Solution

Step 1: Definition of mortgages

A mortgage is a type of long-term loan used to purchase a house of land.

Step 2: Journal entry

Date

Particulars

Debit

Credit

January 1, 2018

Building

$280,000

Land

$55,000

Cash

$15,000

Mortagages payable (B.F)

$320,000

(To record purchase of building and land)

January 31, 2018

12% Mortgages Payable

$3,370

Cash

$3,370

(To record the payment of interest)

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