On November 1, 2003, Hill Company arranges with an insurance company to borrow $200,000 on a 20 year mortgage to purchase land and a building to be used in its operations. The land and the building are pledged as collateral for the loan, which has an annual interest rate of 12%, compounded monthly. The monthly payments of $2,200 are made at the end of each month, beginning on November 30, 2003.
1.Prepare the journal entry to record the purchase of the land and building, assuming that $40,000 of the purchase price is assignable to the land.
2.Prepare the journal entries on November 30 and December 31 for the monthly payments on the mortgage.
3. Interpretive Question: Explain generally how the remaining liability at December 31, 2003, will be reported on the company s balance sheet dated December 31, 2003.