Question

Purchased land and building for $260,000 as follows: $60,000 paid in cash and a 12% note payable due 12/1/19 was signed for $200,000. The land value was $20,000 and the building value was $240,000 The building has a 30-year useful life and no salvage value. The company uses straight line depreciation. How is this posted on the General Journal sheet?

Answer 1

First of all it is not clear from the question that when the asset is purchased.
That is why we will assume that the Interest on Notes payable is on yearly basis
Hence, the Interest expense will be 2,00,000*12%	24,000
Depreciation on Building on straight line basis
240,000/30	8,000
Here are the journal entries for the above transactions:
Land & Building	260,000
Cash		60,000
12 % Note payable		200,000
(Land & Building acquired with cash and Notes payable)
Interest expense	24,000
Interest Payable		24,000
(Inerest expense recognized at end of year)
Depreciation on Building	8,000
Land & Building		8,000
(Depreciation charged on Building)