Reference no: EM132837463
Question - Based on the business events below HOW A (a) journal entry worksheet, (2) post the journal entries to each respective general ledger account and (3) how A basic balance sheet, income statement for the year ended December 31, 2018. Extra credit for the preparation of a statement of cash flows.
On January 1, John, Paul, and Mark form a partnership ("JPM") and each contributes $10M so that each will be a one-third owner JPM.
On January 5, JPM purchases land for $20M.
On February 1, JPM hires a contractor to build a commercial office building for $40M.
On February 15, JPM receives a construction loan from Fast Bank for $30M. The term is for 12 months at 5%.
On March 1, JPM draws down $10M of the construction loan and pays the contractor.
On April 1, JPM draws down $10M of the construction loan and pays the contractor.
On April 1, JPM pays the bank for 1 month of interest.
On May 1, JPM draws down the $10M of the construction loan and pays the contractor
On May 1 JPM pays the bank for interest for the draws on March 1 and April 1.
On June 1, JPM uses $10M of cash to pay the balance to the contractor and the contractor delivers the building. Note, that interest costs on the construction loan are capitalized to the building.
On June 1, JPM receives $30 of permanent financing and uses the proceeds to pay the construction lender along with accrued interest. The term of the permanent loan is 5 years at 4% interest. The loan is self-amortizing with payments of interest and interest due on December 31.
On June 1, JPM rents the entire building to one tenant for a 5 year period. The terms are no rent payable for year 1 and the rents for years 2, 3, 4 and 5 are $10,000, $15,000, $20,000 and $25,000 respectively.
Property taxes are taxes are $1.2 per year prorated.
Management fees are 1.5% of the value of the property (cost for constructed property).
On December 31, JPM records current year depreciation.
On December 31, JPM makes a principal and interest on the permanent loan.