Prepare all journal entries; Book debits and credits to T-Account Excel sheet Ye
ID: 2334781 • Letter: P
Question
Prepare all journal entries; Book debits and credits to T-Account Excel sheet
Year 1 – December 31, 2018
On January 1, 2018, Joan invested $1,500,000 in Fastforward, LLC.
On January 2, 2018, Fastforward deposited $50,000 into an escrow account for the purchase of Building A, a commercial rental building.
On January 2, 2018, Fastforward secured a pre-approved commitment to borrow $3,000,000 from a bank to buy a commercial or apartment building. The loan terms provide for a 5.5% interest rate and an amortization period of 10 years.
On February 1, 2018, Fastforward purchased a vacant, Building A for $3,500,000. The purchase was made with equity of $500,000 (including the deposit made previously) and debt of $3,000,000. Joan valued the land at $500,000 and the building at $3,000,000. No value was placed on other property (fixtures, land improvements, etc.) At closing, Joan assumed $200,000 of tenant security deposits and applied the $50,000 security deposit to the purchase.
Loan payments are due on the 15thof each month. Payments are for principle and interest through the prior month end. All payments were made through December 15, 2018.
In conjunction with a new lease, the Tenant G negotiated certain improvements will be made to the building (to build out the tenant space) before they move in. Joan hired the contractor to complete the renovation and the total improvements were completed at a cost of $250,000 in March 31, 2018, but Joan did not yet pay the contractor for the improvements.
For the period from January 15, 2018 to January 31, 2018, Fastforward incurred and was billed professional fees for due diligence on Building A in the amount of $50,000. The bill was paid immediately upon receipt.
On March 1, 2018, Fastforward signed a 5-year lease with a Tenant G. The lease term runs from April 1, 2018 to March 31, 2023. After three months of no (zero) rental payments, the lease agreement requires even payments of $20,000/mo. over the remaining 57 months. Record the payments at year end.
On May 1, 2018, property taxes of $12,000 were paid, representing six months of taxes that are due for the period from February 1, 2018 – July 31, 2018. Taxes for the next six months are also expected to be $12,000. Five of six months (or $10,000) are owed as of December 31, 2018.
On April 1, 2018 a management fee contract which requires payments of $2,000/mo. was signed. Prepayment of 2-months ($4,000) was required upon signing of the contract.
Utilities were incurred each month as follows: February $280, March $300, April $310, May $300, June $300, July $310, August $320, September $240, October $280, November $290, December $300. The total utility bill for each month was paid in the month after it was incurred, except that both the November and December bill were paid on January 12, 2019.
Professional fees for bookkeeping and tax returns for the year were incurred after year end. The total fees were $2,500 and related to the year ended Dec 31, 2018.
Joan Taylor withdrew $500,000 for her personal use.
ots Payabl Rent Other Expense Crodit Debi Croct Credit Debi Credt Crodit CrediExplanation / Answer
Ans:
Date
Jan 1, 2018. Cash account Dr. $1,500,000
To Joan’s Capital account $1,500,000
(Being the cash brought into business as capital)
Jan 2, 2018. Escrow account Dr. $ 50,000
To Cash account $ 50,000
(Being deposited into an escrow account for the purchase of Building A)
Jan 2, 2018. Bank account Dr. $3,000,000
To Bank Loan account $3,000,000
Feb 1, 2018 Land and Building A account $3,500,000
To Cash+Escrow $3,000,000
To Equity stock/Shares $500,000
Cash account Dr $200,000
To Security Deposits $200,000
(Being purchase of Land and building and security deposit)
Dec 15, 2018
Interest on Loan account Dr $ 13750
To Interest on loan payable $ 13750
Interest on Loan Payable Account Dr $ 13750
To Cash account $ 13750
Or
Bank Loan Account (Principle + Payable Interest) Dr $ 313,750
To Bank Account Credit $ $ 313,750
Building account Dr $250,000
To Contractor account $ 250,000
Building account Dr $50,000
To Cash account $ 50,000
(Being paid for professional fees for due diligence on Building A)
Mar 1, 2018.
Rent account Dr. $ 20,000
To cash account $ 20,000
(Being rent paid for from 1st Jan to 31st Mat 2018)
May 1, 2018
Property taxes Dr $ 12,000
To Cash account $ 12,000
(Being cash paid for property tax)
Property taxes Dr $ 10,000
To Tax payable account $ 10,000
(Being tax to be paid for on property)
April 1, 2018.
Prepaid management fee $ 4,000
To Cash account $ 4,000
(Being Cash paid for management fee in advance)
Utilities expense account $ 3,230
To Utilities payable account $ 3,230
(Being utilities expenses incurred)
Utilities payable account $ 3,230
To Cash account $ 3,230
(Being cash paid to utility expenses)
Dec 31 2018.
Professional fee $ 2,500
To Professional fee payable $ 2,500
(Being Pro.fee incurred during the previous year)
Drawings account Dr. $500,000
To Cash account $500,000