Question

In: Accounting

Kessel Company purchased a building and land with a fair market value of $550,000 (building, $350,000...

Kessel Company purchased a building and land with a fair market value of $550,000 (building, $350,000 and​ land, $200,000​) on January​ 1, 2018. Kessel signed a 20​-year, 6​% mortgage payable. Kessel will make monthly payments of $3,940.37. Round to two decimal places. Explanations are not required for journal entries.

Requirements

  1. Journalize the mortgage payable issuance on January​ 1, 2018.
  2. Prepare an amortization schedule for the first two payments
  3. Journalize the first payment on January​ 31, 2018.
  4. Journalize the second payment on February​ 28, 2018.

Solutions

Expert Solution

Amount borrowed = $550,000
Annual interest rate = 6.00%
Monthly interest rate = 6.00%/12
Monthly interest rate = 0.50%
Period = 20 years or 240 months


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