On January 1, 2021, Gundy Enterprises purchases an office building for $316,000, paying $56,000 down and borrowing the remaining $260,000, signing a 8%, 10-year mortgage. Installment payments of $3,154.52 are due at the end of each month, with the first payment due on January 31, 2021.Part 1Required: Record the purchase of the building on January 1, 2021Part 2Complete the first three rows of an amortization schedule. Part 3

Required:
a. Record the first monthly mortgage payment on January 31, 2021b. How much of the first payment goes to interest expense and how much goes to reducing the carrying value of the loan?4. Total payments over the 10 years are $378,542 ($3,154.52 × 120 monthly payments). How much of this is interest expense and how much is actual payment of the loan?

1. The record of the purchase of the Office Building is as follows:

Debit Office Building $316,000

Credit Cash $56,000

Credit Mortgage Payable $260,000

2. The completion of the first three rows of the amortization schedule is as follows:

Monthly Amortization Schedule  

 DateBeginning BalanceInterest    Principal     Ending Balance

111/2021$260,000.00          $1,733.33       $1,421.19         $258,578.82

212/2021$258,578.82          $1,723.86    $1,430.66   $257,148.16

31/2022$257,148.16           $1,714.32    $1,440.20$255,707.96

3. a. The record of the first monthly mortgage repayment on January 31, 2021 is as follows:

Debit Mortgage Payable $1,421.19

Debit Interest Expense $1,733.33

Credit Cash $3,154.52

3.b. The interest expense is $1,733.33 for the first payment while $1,421.19 reduces the carrying value of the Mortgage Payable.

4. The total interest expense is $118,542.09 while the actual payment for the Mortgage Payable is $260,000.

Data and Calculations:

January 1, 2021:

Cost of Office Building = $316,000

Down payment = $56,000

Mortgage payable = $260,000

Maturity period = 10 years

Mortgage interest rate = 8%

Monthly Repayment = $3,154.52

                               Monthly      Total

Mortgage Payment   $3,154.52  $378,542.09

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Total Payments      $378,542.00

Actual Payment on loan     $260,000.00

Interest Expenses          $118,542.00

Explanation

Date           General Journal            Debit            credit

1-Jan-18

                          Office                      $316,000

                             Cash                                              $56,000

                       Mortgage Payable                             $260,000

                (To record buying office)

2.  Amortization Schedule:

Date         Cash Paid         interest expense    Decrease in            Carrying

                                                                           value                         value

1/1/2018          0                        0                             0                          260000

1/31/2018        3154.52           1733.33                  1421.19                  258578.81

2/28/2018      3154.52          1723.86                 1430.66                  257148.15

Date     General Journal                   Debit                    Credit

1-Jan-18

             Mortgage Payable   $1,421.19

                    Interest expenses   $1,733.33

                            Cash                                                 $3,154.52

(To record first month payments)

          Interest Expenses                      Reducing the carrying value

First Payment   $1,733.33                                         $1,421.19

4. Total Payments      $378,542.00

Actual Payment on loan     $260,000.00

Interest Expenses          $118,542.00

answer may be d i think

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