EX 11-6 Fixed asset purchases with note

On June 30, Beahm Management Company purchased land for $250,000 and a building for $350,000, paying $300,000 cash and issuing an 8% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $15,000 on the principal plus the interest accrued from the date of the preceding payment. Journalize the entry to record (a) the transaction on June 30, (b) the payment of the first installment on December 31, and (c) the payment of the second installment the following June 30.

Answer:

a. June 30 Building......................................................... 350,000    Land .............................................................. 250,000     Note Payable...........................................  300,000     Cash.........................................................  300,000  
b. Dec. 31 Note Payable................................................. 15,000    Interest Expense ($300,000 × 8% × 1/2)...... 12,000     Cash.........................................................  27,000  
c. June 30 Note Payable................................................. 15,000    Interest Expense ($285,000 × 8% × 1/2)...... 11,400     Cash.........................................................  26,400 

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