[Thara1990]

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 yield 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.

[pready]

So what is your question and what have you attempted so far to solve our problem?

[Thara1990]

June 7. DR. land $50 000 000
CR. Cash $10 000 000
CR. Mortgage Payable $40 000 000

Dec 31 DR. Interest Payable $ 8 000 000
DR. Interest Expense $ 560 000
CR. Cash $8 560 000

I want to know if this is correct

p.s. mortgage payable is 7%

[pready]

Your first journal entry is correct.

Your second journal entry for Dec 31 should be (if payment is made):
Debit Mortgage Payable for 8 million
Debit Interest Expense for 1.4 million (40 million *7% * 6 months outstanding/12 months)
Credit Cash for 9.4 million

If payment is not made:
Debit Interest Expense for 1.4 million
Credit Interest Payable for 1.4 million

[Thara1990]

On June 26 2010, cypress purchased an installed weighing equipment at the Westerlund timber site for $196,000 cash. The weighing equipment will be amortized on a straigh-line basis over an estimated useful life of 7 years with no residual value. Cyberpress has a policy of recording depreciation for partial periods to the newarest month. The weighing equipment will be scrapped after the Westerlund site is harvested.

June 26. DR. Equipment $196,000
CR. Cash $196,000

Dec 31. DR. Amortization Expense $14,000
CR. Accumulated Amortization $14,000
(196,000*1/7*6/12)

Is this journal entry correct?

[pready]

Your journal entries look good to me except your equipment should be depreciated instead of amortized.
So your Expense should be Depreciation Expense and you should have Accumulated Depreciation instead of amortization expense and accumulated amortization

[Thara1990]

Thank you pready! ^_^