Elie Company purchased a building with a market value of $ 295 comma 000 and land with a market value of $ 45 comma 000 on January 1, 2018. Elie Company paid $ 40 comma 000 cash and signed a 20 -year, 6 % mortgage payable for the balance.

Requirements:

1. JournalizetheJanuary1,2018, purchase.

2. Journalize the first monthly payment of $3,370 on January 31, 2018. (Round to the nearest dollar.)

1) Jan 1

Dr Building $295,000

Dr Land $45,000

Cr Mortgages Payable 300,000

Cr Cash $40,000

2)

Jan. 31

Dr Mortgages Payable $1870

Dr Interest Expense $1,500

Cr Cash3,370

Explanation:

1) Journal entries

Jan. 1

Dr Building $295,000

Dr Land $45,000

Cr Mortgages Payable 300,000

($295,000+$45,000=$340,000-$40,000

=$300,000)

Cr Cash $40,000

Purchased building and land with mortgages payable and cash payment.

2)

Jan. 31

Dr Mortgages Payable ($3,370 - $1,500) $1870

Dr Interest Expense (300,000 * 0.06 * 1/12) $1,500

Cr Cash3,370

Paid principal and interest payment