I have similar scenario. How do I net out the down payment I made from the gain. Show
Purchase price: $255,000 Down payment: $52,000 Sale Price: $368,365 Here's my original journal entry for trhe down payment when I made the purchase of property Bank Cash debit - $52,000 Equity credit $52,000 Here's my entry for the recent sale (rounded) Mortgage Balance debit - $200,000 Mortgage Interest debit - $365 Escrow debit - $1000 Fees (realtor, title, etc) debit $30,000 Proceeds from sale debit $137,000 Property Fixed Asset credit - $241,000 Land Fixed Asset credit - $14,000 Accum Depreciation credit - $24,000 Property Sale Income credit $89,365 That Income seems high as it includes my down payment in there. What am I doing wrong? A business purchases land and buildings for 650, and pays 350 in cash and issues a 5% note payable for the balance of 300, which is secured by a mortgage on the property. The journal entry to record the initial purchase of the property using a combination of cash and notes payable is as follows: Fixed asset purchases with note journal entry
Fixed Asset Purchases With Note Bookkeeping Entries ExplainedDebit Credit The Accounting EquationThe accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the owners equity of the business. This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.  In this case on the left hand side of the accounting equation, an asset (property) has been increased by the debit entry of 650, and another asset (cash) has been reduced by the credit entry of 350, this results in a net increase in assets of 300. On the right hand side of the accounting equation, a liability (notes payable) has been increased by an amount of 300. Popular Double Entry Bookkeeping ExamplesThis fixed asset purchases with note journal entry is one of many examples used in double entry bookkeeping, discover another at the links below.
About the AuthorChartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University. November 19, 2019 Table of Contents
What is a Mortgage Payable?A mortgage is a long-term loan secured by property as the collateral, usually real estate. This means that if the borrower defaults on mortgage payments, the lender of the mortgage is able to take legal action to sell the underlying real estate to settle the mortgage debt. A mortgage payable is setup on a company’s books to establish the liability owed by the company to a bank. The mortgage payable is then repaid periodically in instalments for a definite period of time, known as the amortization period. The future payments made in respect of the mortgage will be comprised of an interest expense component and a mortgage principal repayment component. Journal entry for the acquisition of fixed assets with a mortgageWhere fixed assets, such as a building, are purchased with the use of a mortgage, the journal entry to properly book this transaction includes a few accounts, including Cash (down payment), Mortgage Payable (the actual mortgage amount outstanding), and the Fixed Asset (to recognize the asset acquired). Example: GoodTime Corporation has just purchased an office building for $1,000,000. GoodTime Corporation paid 10% of the purchase price in cash and financed the remaining 90% of the purchase price with a mortgage from First Capital Bank. The mortgage is amortized over 10 years with an interest rate of 3% per annum.
Journal entry for a mortgage paymentMortgages payments are typically calculated using an amortization calculator. Each payment made towards paying down the mortgage is broken down between an interest component and a principal repayment component. Example: GoodTime Corporation has made its year 1 installment payment of $104,285.64 according to the mortgage amortization table provided by First Capital Bank (below). In year 1, $25,928.42 of the payment relates to interest and $78,357.22 of the payment relates to the mortgage principal repayment.
How do I record a journal entry for purchase of property?Add a home's purchase price to the closing costs, such as commissions, to determine the home's total cost. Write “Property” in the account column on the first line of a journal entry in your accounting journal. Write the total cost in the debit column. A debit increases the property account, which is an asset account.
How do you record purchase of assets with a loan?If you buy a fixed asset and you finance it with a loan or installment plan, you must record it in your accounts. You can record the original purchase by posting a journal. By doing this, you can include any deposits and fees at the same time as the purchase.
How do you record mortgage entries in journal entry?Record the initial loan with a general journal entry. Credit the mortgage's liability account. Debit the property's fixed asset. If you've already made some payments, balance the general journal entry using Opening Balance Equity as the offsetting account.
What is the journal entry for building purchase?This is an Expert-Verified Answer
We debit the asset account, when asset increases. We credit the asset account, when asset decreases. As building is added, we debit the asset account and as cash decreases, we credit the cash account.
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Journal entry for purchase of land and building with mortgage
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