Nance Co. receives $298,700 when it issues a $298,700, 7%, mortgage note payable
ID: 2451368 • Letter: N
Question
Nance Co. receives $298,700 when it issues a $298,700, 7%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $16,241 on June 30 and December 31. Prepare the schedule using effective-interest method to amortize bond premium or discount of Nance Co. (Round answers to 0 decimal places, e.g. 125.) Semiannual Interest Period Cash Payment Interest Expense Reduction of Principal Principal Balance Issue date $ $ $ $ 6/30/15 12/31/15 Show List of Accounts Link to Text Prepare the journal entries to record the mortgage loan. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2014 Show List of Accounts Link to Text Prepare the journal entries to record the first two installment payments. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit First Installment Payment June 30, 2015 Second Installment Payment Dec. 31, 2015
Explanation / Answer
Schedule using effective-interest method to amortize bond premium or discount
interest on 30 june2015 => 298700 * 7% *6/12 => $10455
interet on31 dec 2015 => 292914 * 7% * 6/12 => $10252
record of mortgage laon
Cash A/c dr. $298700
To 7% Mortgage loan A/c cr. $298700
Journal entries for payment of first two installments
on 30 june 2015
7% Mortgage Bonds A./c dr. $ 5786
Interest Expense A/c dr. $10455
TO Cash A/c Cr. $ 16241
on 31st Dec 2015.
7% Mortgage Bonds A./c dr. $ 5989
Interest Expense A/c dr. $10252
TO Cash A/c Cr. $ 16241
Date Interest expense Cash payment Dedcution in principle Balance outstanding 31 dec 2014 - - - 298700 30 june 2015 10455 16241 5786 292914 31 dec 2015 10252 16241 5989 286925Related Questions
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