mortgage question

[ccwebb]

I have question on how to set up a mortgage.

Our church is going from a manual system to PC9+. So our mortgage has been around a long time and the principal is only 40K.

I know that I set up on the credit side a mortgage liability of 40K. Do I setup a land and buildings debit of 40K?

Or do I make the land and buildings debit equal to the approximate current value of the property and set up another credit to unrestricted net assets equal to the difference of the above credit and debit?

Or do I make the land and buildings debit equal to the original mortgage amount and set up another credit to unrestricted net assets equal to the difference of the above credit and debit?

Thanks.....

Charlie

[Jeff]

Land and buildings are shown at historical cost, so you would show them at the price that was paid for them originally. This could be the original loan amount plus any down payment or other amounts paid at that time.

To add the land, buildings and loan to your current records you would:

Credit the mortgage liablity for the curent mortgage balance
Debit the land and buildings for the original amount
Credit the unrestricted equity account for the difference

Another wrinkle in this is if you want to record the depreciation of the buildings. The theory here is that the buildings are long lived assets and you allocate the costs of them over the years of their usefull life. Note that land does not depreciate.

You would probably want to work with an accountant to figure out the correct depreciation amounts.

[ccwebb]

Jeff:

Thanks for the info

Charlie