Journal Entry for purchasing an asset

Question

ABC Company purchased a building for $2,850,000.00

 

At closing the following took place:

Mortgage Loan Payable of $2,796,400.50

Security deposit from tenant $11,121.26

Real Estate Tax Credit of $45,521.74

Received prorated rent amount of $1,736.30

ADT prorated fee $55.80

Closing Cost $ 4,724.00

 

I have the following journal entries

Fixed Asset Building $2,850,000.00

Liability Mortgage Payable $2,796,400.50

Security Deposit Payable $11,121.26

 

How do I record the other amounts

 

 

 

Answer 1

📘 Full Journal Entry – Breakdown

1. Purchase of Building (Fixed Asset):

1. Dr. Building (Fixed Asset) – $2,850,000.00

2. Mortgage Loan Received:

1. Cr. Mortgage Loan Payable – $2,796,400.50

3. Security Deposit from Tenant (liability you owe):

1. Cr. Security Deposit Payable – $11,121.26

4. Real Estate Tax Credit (reduces your out-of-pocket cost):

1. Cr. Real Estate Tax Payable (or Prepaid Taxes, depending on how you handle it) – $45,521.74

5. Prorated Rent Received (income you've collected at closing):

1. Cr. Unearned Rent Revenue (or Rent Income, if recognizing it now) – $1,736.30

6. ADT Prorated Fee (an expense you're absorbing):

1. Dr. ADT Expense (or Prepaid Expense, if for future service) – $55.80

7. Closing Costs (capitalized into the asset, or expensed – depending on your accounting policy):

1. Dr. Building (Fixed Asset) – $4,724.00

8. Cash Required to Close (Balancing Figure):

1. Cr. Cash – $2,850,000 - $2,796,400.50 - $45,521.74 - $1,736.30 + $11,121.26 + $55.80 + $4,724 = $20,021.92

Account Debit Credit
Building	$2,850,000.00
ADT Expense (or Prepaid)	$55.80
Mortgage Loan Payable	$2,796,400.50
Security Deposit Payable	$11,121.26
Real Estate Tax Payable	$45,521.74
Unearned Rent Revenue	$1,736.30
Cash	$20,021.92