Laverne purchased a new piece of equipment to be used in its new facility. The $

Question

Laverne purchased a new piece of equipment to be used in its new facility. The $385,000 piece of equipment was purchased with a $57,750 down payment and with cash received through the issuance of a $327,250, 7%, 5-year mortgage payable issued on January 1, 2017. The terms provide for annual installment payments of $79,813 on December 31. Prepare an installment payments schedule for the first five payments of the notes payable. Prepare the journal entry to record the mortgage loan Prepare the journal entries to record the installment payments.

Explanation / Answer

Amort Chart Year Amt paid Interest Principle Carrying Amt Jan1 Yr1 327250 Dec31 Yr1 79813 22907.5 56905.5 270344.5 Dec31Yr2 79813 18924.12 60888.89 209455.6 Dec31YR3 79813 14661.89 65151.11 144304.5 Dec31 Yr4 79813 10101.32 69711.68 74592.82 Dec31 YR5 79813 5220.18 74592.82 0 Journal entries: Date Accounts title and explanation Debit $ Credit $ Jan1Yr1 Equipment Account Dr. 385000    Cash account 57750    Notes payable account 327250 Dec31 yr1 Notes payable Account Dr. 56905.5 Interest expense Account Dr. 22907.5      Cash Account 79813 Dec31 yr2 Notes payable Account Dr. 60888.89 Interest expense Account Dr. 18924.12      Cash Account 79813 Dec31 yr1 Notes payable Account Dr. 65151.11 Interest expense Account Dr. 14661.89      Cash Account 79813 Dec31 yr1 Notes payable Account Dr. 69711.68 Interest expense Account Dr. 10101.32      Cash Account 79813 Dec31 yr1 Notes payable Account Dr. 74592.82 Interest expense Account Dr. 5220.18      Cash Account 79813

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