On January 1, 2018, Stoops Entertainment purchases a building for $480,000, payi
ID: 2556982 • Letter: O
Question
On January 1, 2018, Stoops Entertainment purchases a building for $480,000, paying $120,000 down and borrowing the remaining $360,000, signing a 8%, 15-year mortgage. Installment payments of $3,440.35 are due at the end of each month, with the first payment due on January 31, 2018.
13.
value:
10.00 points
Required information
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.)
2. Complete the first three rows of an amortization schedule. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
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.)
4. Total payments over the 15 years are $619,263 ($3,440.35 × 180 monthly payments). How much of this is interest expense and how much is actual payment of the loan?
Explanation / Answer
1. Date Account Title Debit Credit Jan 1,2018 Building 480000 Cash 120000 8%,15-Year Mortgage 360000 2.. Date Monthly Installment Tow. Int.(8%/12) Tow.Principal(Col.2- Col.3) Principal balance Jan 1,2018 360000 Jan 31,2018 3440.35 2400 1040.35 358959.65 Feb 28,2018 3440.35 2393.06 1047.29 357912.36 Mar.31,2018 3440.35 2386.08 1054.27 356858.10 3.a. Interest expense 2400 8%,15-Year Mortgage 1040.35 Cash 3440.35 3.b. Towards interest expense (8%/12)*360000 2400 Amt. towards reducing the carrying value of the loan 1040.35 4.. Total payments over 15 yrs. 619263 Less: Actual payment of the loan 360000 So, amt.paid towards Interest expense 259263