Question

Great Adventures Problem AP9-1 Tony's favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, "I've always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place." On November 1, 2022, Great Adventures purchased the land by issuing a $450,000, 6%, 10-year installment note to the seller. Payments of $4,996 are required at the end of each month over the life of the 10-year loan. Each monthly payment of $4,996 includes both interest expense and principal payments (.e., reduction of the loan amount). Late that night Tony exclaimed, "We now have land for our new camp: this has to be the best news ever!" Suzie said, "There's something else I need to tell you. I'm expecting!" They decided right then, if it was a boy, they would name him Venture.

Answer 1

Answer

• Requirement 2

Date	Accounts title	Debit	Credit
01-Nov-22	Land (or Cash)	$450,000
	Notes Payable		$450,000
	(to record issuance)
30-Nov-22	Notes Payable	$2,746
	Interest Expense	$2,250
	Cash		$4,996
	(to record instalment payment)
31-Dec-22	Notes Payable	$2,760
	Interest Expense	$2,236
	Cash		$4,996
	(to record instalment payment)

• Requirement 3

Balance of Notes Payable on 31 Dec 2022 = $ 444,494

• Workings

Date	Cash Paid	Interest Expense	Change in Carrying Value	Carrying Value
01-Nov-22				$450,000
30-Nov-22	$4,996	$2,250	$2,746	$447,254
31-Dec-22	$4,996	$2,236	$2,760	$444,494

--Working

Date	Cash Paid	Interest Expense	Change in Carrying Value	Carrying Value
01-Nov-22				450000
30-Nov-22	4996	=450000*6%*1/12	=4996-2250	=450000-2746
31-Dec-22	4996	=447254*6%*1/12	=4996-2236	=447254-2760