Question

Kaler Company purchased a building and land with a fair market value of $575,000 (building, $325,000 and land, $250,000) on January 1, 2018. Kaler signed a 25-year, 15% mortgage payable. Kaler will make monthly payments of $7,364.78. Round to two decimal places. Explanations are not required for journal entries. Read the requirements then credits. Exclude explanations from any journal entries.) Date Accounts Debit Credit 2018 Building 325,000.00 Jan. 1 Land 250,000.00 Mortgage Payable 575,000.00 Requirement 2. Prepare an amortization schedule for the first two payments. (Round all numbers to the nearest cent.) Beginning Principal Interest Ending Total Balance Рayment Expense Payment Balance 575000 1/1/2018 575000 1/31/2018 2/28/2018

Answer 1

Working Note: Interest Expense Debited = Beginning Balance of Note Payable x Rate of Interest (15%) x 1/12. Ending Balance of Note Payable = Beginning Balance - Debit Note Payable These calculations are tabulated as follows. 1. Preparation of Amortization Schedule for Notes Payable: Period Ending Beginning Principal Interest Total Ending Date Balance Payment Expense Payment Balance 1/1/2018 $ 575,000.00 1/31/2018 $ 575,000.00 $ 177.28 $ 7,187.50 $ 7,364.78 $ 574,822.72 2/28/2018 $ 574,822.72 $ 179.50 $ 7,185.28 $ 7,364.78 | $ 574,643.22 Note: Interest Expense = Beginning Balance x 15%xlmonth/12months Principal Payment = Total Payment or Installment Payment - Interest Expense