Question

Accounting for mortgages payable

Ember Company purchased a building with a market value of \(280,000 and land with

a market value of \)55,000 on January 1, 2018. Ember Company paid \(15,000 cash and

signed a 25-year, 12% mortgage payable for the balance.

Requirements

1. Journalize the January 1, 2018, purchase.

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

nearest dollar.)

Short answer

1. The building and land is debited with the amount of $280,000 and $55,000. Cash and mortagages payable is creadited with $15,000 and $320,0000
2. The mortgages payable is debited with $3,370 and cash account is credited with $3,370.

Step-by-step solution

Definition of mortgages

A mortgage is a type of long-term loan used to purchase a house of land.

Journal entry

Date	Particulars	Debit	Credit
January 1, 2018	Building	$280,000
	Land	$55,000
	Cash		$15,000
	Mortagages payable (B.F)		$320,000
	(To record purchase of building and land)
January 31, 2018	12% Mortgages Payable	$3,370
	Cash		$3,370
	(To record the payment of interest)