Question

Kaman Company purchased a building and land with a fair market value of $575,000 (building, $300,000 and land, $275,000) on January 1, 2018. Kaman signed a 25-year, 15% mortgage payable. Kaman will make monthly payments of $7,364.78. Round to two decimal places. Explanations are not required for journal entries. Read the requirements. Requirement 1. Journalize the mortgage payable issuance on January 1, 2018. (Record debits first, then credits. Exclude explanations from any journal entries.) Date Accounts Debit Credit 2018 Jan. 1 Land 275,000.00 300,000.00 Building Mortgage Payable 575,000.00 Requirement 2. Prepare an amortization schedule for the first two payments. (Round all numbers to the nearest cent.) Beainning Principal Interest Total Ending

Answer 1

Solution: Debit Credit Part 1: Date Accounts 2018 Jan 1. Land Building Mortgage payable 275,000.00 300,000.00 575,000.00 Part 2: Beg. Bal e-a-d 1/1/2018 1/31/2018. 2/28/2018. Principal payment Interest expense Total Payment Ending bal. bd-c c=a*15%*1/12 d 575,000.00 177.28 7,187.50 7,364.78 574,822.72 179.50 7,185.28 7,364.78 574,643.22 575,000.00 574,822.72 Credit Part 3: Date Accounts Debit 2018 Jan 31. Interest expense Mortgage payable Mortgage payable 7,187.50 177.28 7364.78 Debit Credit Part 4: Date Accounts 2018 Feb 28. Interest expense Mortgage payable Mortgage payable 7,185.28 179.50 7364.78