Asked by Thara

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...
Answered by helper
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.



Answered by Thara
I need help with the DECEMBER 31 part...thnx
Answered by Thara
oh thnx...lol i guess i am a slow typer
Answered by Thara
oh the interest payment is 7%
Answered by Thara
i got it thnx ^_^
Answered by Thara
is dis correct for DEC31 :S

dr. Interest payable $8 million
dr. Interest Expense $560,000
cr. cash $8,560,000
Answered by Thara
oops the ans i just posted is wrong...i got its thnc
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