[Minder86]

Hi there... I was wondering if you can help me out with the following so then I would be able to know how to do the rest. Thank you.


1) how would you record the following adjusting entries?

a. during the next fiscal year, $5,400 of the mortgage payable is to be paid
- on the trial balance it says mortgage payable with %105,00 (credit side)

I know the amount would be 99,600... but what's the adjusted journal entry for this?
Is it...
Mortgage expense
Mortgage payable
??

[morgaine300]

It doesn't say what is to be done with it. I see two possibilities, one of which is that the current portion could be moved from long-term to current liability. I personally would just take care of that on the balance sheet and not literally make an entry, but I occasionally see books that do require an entry for that.

A mortgage also may require having interest accrued, assuming you did not just make a payment at the very end of the accounting period. The entry you're giving is that one, and it is almost correct. That's an accrued expense and all accrued expenses work that way: the point is to recognize the expense with a debit, and since an accrual hasn't been paid, then also credit some type of payable.

You just need an appropriate name for it. i.e. you can have salaries expense and salaries payable, income tax expense and income tax payable, etc. Call it what it is. The thing that would be accrued here is NOT the mortgage. It's already on the books and there's no such thing as mortgage expense. (A mortgage is a loan, not an expense.) What you would be accruing is interest. So call it that.

But I have no idea where you got the 99,600 from, and I don't understand what %105,00 means. The information you have provided doesn't include anything that would help us figure the interest, nor does it really indicate which of the above entries might be the one they want. (Or both perhaps.)