Question

Sandhill Resort Corp. issued a 20-year, 5%, $202,000 mortgage note payable to finance the construction of a new building on December 31, 2021. The terms provide for semi-annual instalment payments on June 30 and December 31.

(a)

Prepare the journal entries to record the mortgage note payable and the first two instalment payments assuming the payment is a fixed principal payment of $5,050.

Answer 1

--Journal entries, based on data provided

Date	Accounts title	Debit	Credit
31-Dec-21	Cash (or Building)	$202,000
	Mortgage Payable		$202,000
	(to record the finance)
30-Jun-22	Interest Expense ($202000 x 5% x 6/12)	$5,050
	Mortgage Payable	$5,050
	Cash		$10,100
	(to record #1 payment)
31-Dec-22	Interest Expense [($202000 - 5050) x 5% x 6/12]	$4,924
	Mortgage Payable	$5,050
	Cash		$9,974
	(to record #2 payment)