Question

2. On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and

Answer 1

Answer:

(a) Debit Equipment for $300,000; Credit Cash for $50,000; and Credit Mortgage Note for $250,000

(b) Debit Mortgage Note for $13,572; Deebit Interest expense - Mortgage for $32,500; Credit Cash for $46,072.

Explanation:

(a) Prepare the journal entry for the purchase of the equipment.

The journal entries will look as follows:

Date              Accounts Name and Explanation     Debit ($)      Credit ($)  

1 Jan 2017     Equipment                                           300,000

                       Cash                                                                         50,000

                       Mortgage Note                                                      250,000

                     (To record purchase of the equipment.)                                  

(b) Prepare the journal entry for the January 1, 2018 mortgage payment.

The journal entries will look as follows:

Date                Accounts Name and Explanation       Debit ($)     Credit ($)

1 Jan 2018       Mortgage Note                                      13,572

                         Interest expense - Mortgage              32,500

                         Cash                                                                           46,072

                       (To record mortgage and interest payments.)