Thank You. Bay Front Co. receives $240, 100 when it issues a $240, 100, 12%, mor

Question

Thank You.

Bay Front Co. receives $240, 100 when it issues a $240, 100, 12%, mortgage note payable to finance the construction of a building at December 31, 2012. The terms provide for semiannual installment payments of $20,530 on June 30 and December 31. Instructions Prepare the journal entries to record the mortgage loan and the first two installment payments. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2. Round answers to 0 decimal places, e.g. 125.)

Explanation / Answer

Hi,

Please find the answer as follows:

31 Dec 2012

Cash Dr. 240100

Mortgage Note Payable Cr. 240100

30 June 2013

Interest Expense Dr. (240100*12%/2) 14406

Mortgage Note Payable Dr. (20530 - 14406) 6124

Cash Cr. 20530

31 Dec 2013

Interest Expense Dr. (233976*12%/2) 14039

Mortgage Note Payable Dr. (20530 - 14039) 6491

Cash Cr. 20530

Thanks.

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