Select the entry which correctly records the purchase of a building for $300 000 financed by a $100 000 cash deposit with the balance payable via a 20 year, 8% mortgage. Ignore GST.

Question

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The purchase of the building is recorded as a debit to buildings for the total cost of $300,000. The cash deposit of $100,000 is recorded as a credit to bank. The remaining balance of $200,000 is recorded as a credit to mortgage, as this represents the liability that will need to be paid off over the 20-year term.

Select the Entry Which Correctly Records the Purchase of a Building