On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance
Gaskin will make yearly payments of $46,072. The amortization schedule for the first five payments is provided.
Beginning Balance Principal Payment Interest Expense Total Payment Ending Balance
01/01/2017 $250,000
01/01/2018 $250,000 $13,572 $32,500 $46,072 236,428
01/01/2019 236,428 15,336 30,736 46,072 221,092
01/01/2020 221,092 17,330 28,742 46,072 203,762
01/01/2021 203,762 19,583 26,489 46,072 184,179
01/01/2022 184,179 22,129 23,943 46,072 162,050
Prepare the journal entry for the purchase of the equipment and for the January 1, 2018 mortgage payment.
What will be an ideal response
Acquisition of the property
1/1/17 Equipment 300,000
Mortgages Payable 250,000
Cash 50,000
1/1/18 Mortgages Payable 13,572
Interest Expense 32,500
Cash 46,072
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