Question

Exercise 15-10 a-b (Part Level Submission) Pharoah Company borrowed $316,000 on January 1, 2020, by issuing a $316,000, 10% mortgage note payable. The terms call for annual installment payments of $57,000 on December 31. (a) Prepare the journal entries to record the mortgage loan and the first two installment payments. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit

Answer 1

Answer to EX 15-10 (First question in the list): When firm issued mortgage note payable to borrow $316,000, firm would have received cash of $316,000 & it would be the initial note payable balance at the inception of mortgage note payable repayment schedule. During first installment payment, interest at 10% on initial note payable balance of $316,000 shall be recorded as interest expense. Difference between annual installment of $57,000 and interest expense calculated above, shall be considered as decrease in note payable balance. Similar, pattern shall be followed throughout repayment period. Credit Date Jan. 1, 2020 $316,000 Dec. 31, 2020 Account Titles and Explanation Debit Cash $316,000 Mortgage Note Payable (To record mortgage note payable issued for cash) Interest Expense $31,600 Mortgage Note Payable $25,400 Cash (To record first installment of note payable paid) Interest Expense $29,060 Mortgage Note Payable $27,940 Cash (To record second installment of note payable paid) [$316000 x 10%] [Balancing figure --> $57000 - $31600] $57,000 Dec. 31, 2021 [($316000 - $25400) x 10% = $290600 x 10% = $29060) [Balancing figure --> $57000 - $29060] $57,000