Setting up New Mortgage

[jolivarez]

Our church recently bought a new building and I need help setting it up. I know to set up a fixed assest account and a liability account. The church bought the building for $265000 but included in the loan was the origination fee of $5000 and first month's interest of $864.61. We are paying interest only because it is a construction loan and we can borrow up to $500000. I am not sure what kind of journal entries should be made and for what amounts.

Thanks!

[JohnDMeyers]

I am assuming you made a single purchase, as opposed to paying as it built.

You said you bought the building for $265,000, so I am assuming the loan was for $270,864.61 with the fee and interest added on.

To receive the mortgage:
01-1110-000 General Checking DB $270,864.61
01-2610-000 Mortgage CR $270.864.61

To set up the building asset:
01-1110-000 General Checking CR $270,864.61
01-1601-000 Building DB $265,000
01-5610-000 Mortgage Int DB $864.61
01-5611-000 Loan Fee DB $5,000

If the church is still under construction, things would be different. Part, or all, of a construction loan could be a current liability if it was to be used in the current year. Let me know.

[jolivarez]

We will be borrowing up to $500,000 by the end of the loan and within this year. What would change? Thanks for your help.

[JohnDMeyers]

If you want to track the construction loan separately from the mortgage until the construction is completed, then create a construction loan liability. After the construction is completed, I assume the construction loan will be rolled into the mortgage.

create 01-2620 Construction Loan

If you receive $25,000 in the construction loan:
01-1110-000 DB $25,000
01-2620-000 CR $25,000

As you pay your contractors:
01-1110-000 CR $paid out
01-1610-000 DB $paid out that go directly into the building
01-5xxx-000 DB $paid out in expenses like fees, etc.

Then repeat if you receive more chunks in the construction loan.

To roll the construction loan into the mortgage:

01-2610-000 CR $construction loan
01-2620-000 DB $construction loan