Q19E_3 - Horngren'S Financial And Managerial Accounting

Question

Preparing an amortization schedule and recording mortgages payable

entries

Kellerman Company purchased a building and land with a fair market value of

\(550,000 (building, \)425,000, and land, \(125,000) on January 1, 2018. Kellerman

signed a 20-year, 6% mortgage payable. Kellerman will make monthly payments of

\)3,940.37. Round to two decimal places. Explanations are not required for journal

entries.

Requirements

1. Journalize the mortgage payable issuance on January 1, 2018.

2. Prepare an amortization schedule for the first two payments.

3. Journalize the first payment on January 31, 2018.

4. Journalize the second payment on February 28, 2018.

Step-by-Step Solution

Answer

The mortgage payable account and interest expense account is debited with $1,190.37 and $2,750.

Step 1: Definition of journal entry

Journal entry is the entry which are made by the company to record the financial event or transaction took place in company.

Step 2: Journal entry of the payment

Date	Particular	Debit	Credit
January 31, 2018	Mortgage Payable	$1,190.37
	Interest Expense	$2,750
	Cash		$3,940.37
	(Being entry to record the first payment)