Question

On January 1, 2021, Gundy Enterprises purchases an office building for $327,000, paying $57,000 down and borrowing the remaining $270,000, signing a 7%, 10-year mortgage. Installment payments of $3,134.93 are due at the end of each month, with the first payment due on January 31, 2021.

1. Record the purchase of the building on January 1, 2021.

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, 2021.

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 10 years are $376,192 ($3,134.93 × 120 monthly payments). How much of this is interest expense and how much is actual payment of the loan?

Answer 1

1)
Date	General journal				Debit	Credit
1/1/2015	Buildings				327,000
	Cash					57,000
	Mortgage payable					270,000
2)
Date	Cash	interest	decrease in	Carrying
	paid	expense	CV	value
1/1/2015				270,000
1/31/2015	3,134.93	1575	1,559.93	268,440.1
2/28/2015	3,134.93	1565.90	1569.03	266871.04
3-a)
Date	General journal				Debit	Credit
12/31/2015	interest expense				1,575
	mortgage payable				1,559.93
	cash					3,134.9
3-b)			interest	Reduce the
			expense	CV
	first payment		1,575	1,559.93
4)	Actual payment of loan				270,000
	interest expense				106,192
					376192