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Discussion:DISCLOSURE & BOOKING OF LONG TERM REAL ESTATE INTEREST

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Discussion Forum Index --> Accounting Questions --> DISCLOSURE & BOOKING OF LONG TERM REAL ESTATE INTEREST


Infotax (talk|edits) said:

4 May 2007
PURCHASE PRICE=$550,000.00

INTEREST PAYABLE =$1,043,159.53 PAYBACK= $1,593,159.53

1. HOW MUCH INTEREST SHOULD BE RECORDED ON LONG TERM BASIS AND DISCLOSED IN THE FINANCIAL STATEMENT.

2. WHAT SHOULD BE THE BASIS OF THE BUILDING.

3. PERIOD 30 YEARS

Natalie (talk|edits) said:

May 4, 2007
Please don't shout at us.

What is the loan amount?

Was only a building purchased for $550,000? If not, what else was bought?

What do you mean when you state "payback = $1,593,159.53"?

I think we need more information.

Natalie (talk|edits) said:

May 4, 2007
Hold on. Now that I read this again, I think what you're saying as that by the end of the 30 years, $1,593,159.53 will have been paid for a building and $1,043,159.53 of that is for interest. Is that correct?

Bx524 lca (talk|edits) said:

May 4, 2007
So...9% interest rate? Loan Amount $550,000?

You would probably want to disclose the current portion of interest (12 months) and lay out the next 5 years worth of interest expense. With a total disclosure after that for all years after 5 years.

Just my 2 cents...

Natalie (talk|edits) said:

May 6, 2007
Db. Building $550,000 Cr. Long-term loan $540,000 and Cr. Current portion of long-term debt $10,000 (or whatever the principal portion is for the next 12 months).

The interest expense gets recorded monthly based on the portion of the payment that is for the interest. In the disclosures you would include the terms of the loan, e.g., % rate, 30 years and the current maturities for each of the next five years. You would also include the amount of interest expense for the current year. You are not required to disclose the total amount of interest for the life of the loan, but I guess you could if you wanted to.

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