Question

On January 1, 2018, Gundy Enterprises purchases an office for $294,000, paying $54,000 down and borrowing the remaining $240,000, signing a 7 %, 10- year mortgage. Installment payments of $2,786.60 are due at the end of each month, with the first payment due on January 31, 2018 value 9.09 points Required information Required: 1. Record the purchase of the building on January 1, 2018. (f no entry is required for a transactionlevent, select "No joumal entry required" In the first account fleld.) View transaction list Journal entry worksheet Record the purchase of the building. Note: Enter debits before credits Date General Journal Debit Credit January 01, 2018 Record entry Clear entry View general journal 2. Complete the first three rows of an amortization schedule. (Do not round intermediate calcu lations. Round your final answers to 2 decimal places.) Decrease in Interest Date Cash Paid Carrying Value Carrying Value Expense 01/01/18 01/31/18 02/28/18
please explain how to solve

Answer 1

Solution Cost of building Less: Down payment Mortgage loan $294,000 ($54,000) $240,000 7% Interest rate p.a. Monthly installment Loan period No. of installments (10 years x 12) $2,786.60 10 Years 120 Required 1: Credit Debit $294,000 Date General Journal January 01, 2018 Buildings Cash Notes Payable (To record purchase of building) $54,000 $240,000 Required 2: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 01/01/2018 01/31/2018 02/28/2018 $2,786.60 $2,786.60 $1,400.00 $1,391.91 $1,386.60 $1,394.69 $240,000.00 $238,613.40 $ 237,218.71 ] Required 3-a: Credit Date General Journal January 31, 2018 Interest expense Notes Payable Cash (To record first monthly mortgage payment) Debit $1,400.00 $1,386.60 $2,786.60

Required 3-b: Interest Expense Reducing the Carrying Value $1,386.60 First Payment $1,400.00 Required 4: Total payment over 10 years ($2,786.60 x 120) Less: Actual payments of loan (See note 1) Interest expense $334,392.00 ($240,000.00) $94,392.00 Note 1: Since the mortgage period is 10 years, hence in 10 years in 120 installments, full loan shall be repaid. Actual payment of loan Interest expense $240,000.00 $94,392.00

To see the formulas, please see the below images:

B Solution Cost of building Less: Down payment Mortgage loan 294000 -54000 =SUM(F3:F4) Interest rate p.a. Monthly installment 0.07 2786.6 Loan period 10 Years 9 No. of installments (10 years x 12) 120 10 11 Required 1: Credit Debit 1294000 Date General Journal January 01, 2018 Buildings Cash Notes Payable (To record purchase of building) --F4 FS Required 2: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 01/01/2018 01/31/2018 02/28/2018 =$F$8 ESF58 =F23$F$7/12 =F24*$F$7/12 =C24-D24 =C25-D25 =G17 =F23-E24 =F24-E25 Required 3-a: Credit Date General Journal January 31, 2018 interest exper Notes Payable 1 Cash To record first monthly mortgage payment Debit =D24 =E24 |=F30-F31

C D E F G 34 35 Required 3-b: 36 Interest Expense Reducing the Carrying Value First Payment -F30 =F31 Required 4: 41 43 Total payment over Less: Actual payme Interest expense =2786.6*120 -240000 =SUM(F42:F43 44 45 Note 1: Since the mortgage period is 10 years, hence in 10 years in 120 installments, full loan shall be repaid. Actual payment of le Interest expense =F44