Tucki Co. receives $240,000 when it issues a $240,000, 8%, mortgage note payable

Question

Tucki Co. receives $240,000 when it issues a $240,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $17,660 on June 30 and December 31. Prepare the journal entries to record the mortgage loan and the first two installment payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Dec. 31, 2014 June 30, 2015 Dec. 31, 2015

Explanation / Answer

semiannual 1 semiannual 2 Jun-30 Dec-30 opening 240000.00 231940.00 Add : Interest @ 8% pa for half year /(A) 9600.00 9277.60 Less :Fixed Instalment (B) 17660.00 17660.00 closing balance 231940.00 223557.60 Principal repayment ( B -A) 8060.00 8382.40 Journal entries 31-Dec-14 Cash Dr 240000               Notes Payable Cr 240000 ( To record issuance of 8% notes payable) 30th June Interest Expense Dr 9600 Notes Payable Dr 8060                       Cash Cr 17660 ( To record 1st instalment repayment) Refer working above 31st December Interest Expense Dr 9277.60 Notes Payable Dr 8382.40                       Cash Cr 17660 ( To record 2nd instalment repayment) Refer working above

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