Talkington Electronics issues a $353,700, 10%, 10-year mortgage note on December
ID: 2459258 • Letter: T
Question
Talkington Electronics issues a $353,700, 10%, 10-year mortgage note on December 31, 2013. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $28,382. Payments are due June 30 and December 31.
1 Prepare an installment payments schedule for the first 2 years.
2 Prepare the entries for (1) the loan and (2) the first two installment payments.
3 Show how the total mortgage liability should be reported on the balance sheet at December 31, 2014. ( Talkington Electronics balance sheet December 31 2014 )
Explanation / Answer
1) Installment payments schedule for the first two years:
Total
(Installment)
The relevant calculations are given below:
2) Journal Entries:
Long Term Note Payable
Cash
(Issue of 10 year Mortgage NOte)
353,700
Interest Expense
Long Term Note Payable
Cash
(Payment of 1st Installment of Long term Note)
17,685
10,697
28,382
Interest Expense
Long Term Note Payable
Cash
(payment of 2nd installment of the Long Term Note)
17,150
11,232
28,382
3) For reporting purposes the principal payments due in the next twelve months should be reported as a Curent Liability and the balance should be reported under Long Term Liability. Hence, the reporting would be as under as on 12.31.2014:
LIABILITIES: (12.31.2014)
Current Liabilities:
Current Portion of Long term Notes: $ 24,176
Long Term Liabilities:
Long Term Note Payable $ 331,770
Less: Current Portion 24,176
307,595
Date of Installment Principal Repayment InterestTotal
(Installment)
JUNE 30, 2014 10,697 17,685 28,382 DECEMBER 31,2014 11,232 17,150 28,382 JUNE 30, 2015 11,793 16,589 28,382 DECEMBER 31,2015 12,383 15,999 28,382Related Questions
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