On June 1, 2018, Bellamy Corporation borrowed $400,000 on a 15-year mortgage to purchase land and a building. The land and building are pledged as collateral on the mortgage, which has an interest rate of 12 percent compounded monthly. The payments of $4,800 are made at the end of each month, beginning on June 30, 2018. (Round amounts to the nearest dollar.)
a. Prepare the journal entry for the purchase of the land and building, assuming that $100,000 is assignable to the land.
b. Prepare journal entries for the monthly payments on June 30, July 31, and August 31. Round the amounts to the nearest dollar.
c. Calculate the balance in the mortgage liability account after the August 31 payment.
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Answer:
On June 1, 2018, Bellamy Corporation borrowed $400,000 on a 15-year mortgage to purchase land and a building. The land and building are pledged as collateral on the mortgage, which has an interest rate of 12 percent compounded monthly. The payments of $4,800 are made at the end of each month, beginning on June 30, 2018. (Round amounts to the nearest dollar.)
a. Prepare the journal entry for the purchase of the land and building, assuming that $100,000 is assignable to the land.
b. Prepare journal entries for the monthly payments on June 30, July 31, and August 31. Round the amounts to the nearest dollar.
c. Calculate the balance in the mortgage liability account after
Shashi, Santosh and Shanta are in partnership and as at 1st April, 2020 their respective capitals were: 40,000,30,000 and 30,000. Santosh is entitled to a salary of 6,000 p.a. and Shanta 4,000 p.a. payable before division of profit. Interest is allowed on capitals @ 5% p.a. and is not charged on drawings.
Of the divisible profits, Shashi is entitled to 50% of the first 10,000, Santosh to 30% and Shanta to
20%, over that amount profits are shared equally. Profit for the year ended 31st March, 2021, after
debiting partners' salaries but before charging interest on capitals was 21,000 and the partners had
drawn 10,000 each on account of salaries, interest and profit.
Prepare Profit and Loss Appropriation Account showing the distribution of profit and Capital Accounts
of the partners.