Cypress purchased a 50,000-hectare tract of timber land at Westerlund on June 7,2010, for $50 million, paying $10 million cash and signing a % mortgage payable for the balance. Principal payments of $8 million and the annual interest on the mortgage are due each December 31. It is estimated that this tract will yeild 1 million tonnes of timber. The timber tract's estimated residual value is $2 million. Cypress expects it will cut all the trees and then sell the Westerlund site in five year.
i need help making a journal entry for this...plz plz plz help...i cant seem to move one without know how to do this part...
Are you sure it's only one journal entry?
For the $50 mil transaction, $50 DB to Asset Account, $10 mil paid in cash (CR Cash) and the remaining $40 mil is a loan payable (CR Loan Pay).
Since $8 mil principal and interest is due each Dec 31, this must be a 5-yr loan (40 mil/8 mil = 5 yrs).
You don't have an interest rate so I can't figure the interest payments /year.
I'm not sure what entry, if any, you are supposed to make for the Principal/interest payment?
If you did, you would DB Loan Payable for the Principal amt (8 mil), DB Interest Expense for interest amt, and cash for the total amt.
I don't know what to do with the 1 mil tonnes of timber and the 2 mil residual val.
Check this because my accounting is rusty and this was only a quick outline.
I need help with the DECEMBER 31 part...thnx
oh thnx...lol i guess i am a slow typer
oh the interest payment is 7%
i got it thnx ^_^
is dis correct for DEC31 :S
dr. Interest payable $8 million
dr. Interest Expense $560,000
cr. cash $8,560,000