On January 1, 2018, Gundy Enterprises purchases an office for $283,000, paying $
ID: 2592362 • Letter: O
Question
On January 1, 2018, Gundy Enterprises purchases an office for $283,000, paying $53,000 down and borrowing the remaining $230,000, signing a 8%, 10-year mortgage. Installment payments of $2,790.53 are due at the end of each month, with the first payment due on January 31, 2018.
Problem 9-1A Part 1
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.)
Problem 9-1A Part 2
2. Complete the first three rows of an amortization schedule. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Problem 9-1A Part 3
Required:
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.)
Problem 9-1A Part 4
4. Total payments over the 10 years are $334,864 ($2,790.53 × 120 monthly payments). How much of this is interest expense and how much is actual payment of the loan?
No Date General Journal Debit Credit 1 January 01, 2018 Buildings 283,000 Cash 53,000 Notes payable 230,000Explanation / Answer
2)
Date
Cash paid
Interest expense
Decrease in carrying value
Carrying value
01/01/18
230000
01/31/18
2790.53
230000*8%*1/12 = 1533.33
2790.53-1533.33 = 1257.2
230000- 1257.2 = 228742.80
02/28/18
2790.53
228742..8*8%*1/12 = 1524.95
2790.53 -1524.95 = 1265.58
228742.80 - 1265.58 = 227477.22
3a)
January 31,018:
Interest expense Dr 1533.33
Note Payable Dr 1257.20
Cash Cr 2790.53
3b)
Interest expense = 1533.33
Reducing the carrying value = 1257.20
4)
Actual payment of the loan = 230000
Interest expense = 334864 – 230000 =104864
Date
Cash paid
Interest expense
Decrease in carrying value
Carrying value
01/01/18
230000
01/31/18
2790.53
230000*8%*1/12 = 1533.33
2790.53-1533.33 = 1257.2
230000- 1257.2 = 228742.80
02/28/18
2790.53
228742..8*8%*1/12 = 1524.95
2790.53 -1524.95 = 1265.58
228742.80 - 1265.58 = 227477.22