086 Interest - Mortgages
Expenses
Fixed
Synopsis
The monthly provision for Interest paid or payable on Mortgage loans secured by real estate owned by the dealership and used in the auto business is recorded in Account 086, Interest –Mortgages.
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Debits |
Credits |
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Example 1
Record the accrual of $22,500 for interest on the real estate mortgage for the current month. The $22,500 is distributed to each department as shown in the example below.
Journal: Standard Entries Journal
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Entry: |
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Debit |
Credit |
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Account 086-01 |
Interest – Mortgages – New Vehicles Department |
$4,725 |
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Account 086-02 |
Interest – Mortgages – Used Vehicles Department |
$3,375 |
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Account 086-03 |
Interest – Mortgages – Lease & Rental Department |
$450 |
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Account 086-05 |
Interest – Mortgages – Mechanical Department |
$4,275 |
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Account 086-06 |
Interest – Mortgages – Body Shop Department |
$2,250 |
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Account 086-07 |
Interest – Mortgages – Parts & Accessories Department |
$4,050 |
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Account 086-09 |
Interest – Mortgages – General & Administrative |
$3,375 |
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Account 320 |
Interest Payable |
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$22,500 |
Distribution of Expenses
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Departmental Distribution |
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086 Interest - Mortgages |
New Veh. |
Used Veh. |
Lease & Rental |
Mechanical |
Body Shop |
Parts & Access. |
Gen & Admin. |
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01 |
02 |
03 |
05 |
06 |
07 |
09 |
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Mortgage interest applicable to several or all departments |
Relative value factor |
Relative value factor |
Relative value factor |
Relative value factor |
Relative value factor |
Relative value factor |
Relative value factor |
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Mortgage interest for separate lease and rental building |
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Total expense |
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Mortgage interest for separate used car building |
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Total expense |
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Comments
The monthly provision for Interest paid on Real Estate Mortgages should be pro-rated to each Department using the relative value factor method. The exception is when a Department occupies a completely separate facility such as an off-site body shop. For these exceptions, the entire monthly provision is charged to the benefiting Department.
As monthly statements are received from the lender, it should be inspected to make sure that the previous payment has been properly credited. Discrepancies should be recorded immediately.