mybusinesscourse.com E10-108 alexpavios1997@gmail.com-Gma E Menu Installment Ter

Question

mybusinesscourse.com E10-108 alexpavios1997@gmail.com-Gma E Menu Installment Term Loan On December 31, 2014, Beam, Inc., borrowed $500,000 on an six percent, ten-year mortgage note payable. The note is to be repaid in equal quarterly installments of $16,714 beginning March 31, 2015). Prepare journal entries to reflect (a) the issuance of the mortgage note payable, (b) the payment of the first installment on March 31, 2015, and (c) the payment of the second installment on June 30, 2015. Round amounts to the nearest dollar Finish attem General Journal Date Debit Credit Dec 31 Borrowed a mortgage note payable. Mar 31 Interest Expense Cash To record quarterly payment 5 6 8

Explanation / Answer

Par value of the mortgage = (A) 500000 Interest @ 6% for three month = 1.5% = (B) $7,500 Less: First installment amount for March 31, 2015 ('C) $16,714.00 Carrying value at April 01, 2015 (A +B-C) $4,90,786 Interest @ 6% for three month = 1.5% on above for June 30, 2015 $7,362 Journal Entries Date Account Title and explanation Debit Credit Cash $              5,00,000 December 31, 2014      To 6% Mortgage $                       5,00,000 (Borrowed a mortgage note payable) Interest Expenses $                    7,500 March 31, 2015 6% Mortgage (Balance Amount) $                    9,214       To Cash $                           16,714 (T o Record the quarterly payment) June 30, 2015 Interest Expenses $                    7,362 6% Mortgage (Balance Amount) $                    9,352       To Cash $                           16,714 (T o Record the quarterly payment)

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