Question

CHAPTER 9 Long-Term Liabilities E9-2 On January 1, 2021, Tropical Paradise borrows $50,000 by agreeing to a 6%, six-year note with the bank. The funds will be used to purchase a new BMW convertible for use in promoting resort properties to potential customers. Loan payments of $828.64 are due at the end of each month with the first installment due on January 31, 2021. Required: Record the issuance of the installment note payable and the first two monthly payments. E9-3 On January 1, 2021, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, Jalen plans to make four installment payments of $215,221.64 on June 30 and December 31 in 2021 and 2022. The payments include interest at a rate of 6%. Required: 1. Record the purchase of land when the note is issued. 2. Record the first installment payment on June 30, 2021, and the second installment payment on December 31, 2021. 3. Calculate the balance of Notes Payable and Interest Expense on December 31, 2021. E9-4 Coney Island enters into a lease agreement for a new ride. The lease payments have a present value of $2 million. Prior to this agreement, the company's total assets are $25 million and its total liabilities are $15 million.
problem e9-2 and e9-3

Answer 1

Tropical Paradise Journal Enteries Debit in $ Credit in $ Particulars Date 31.1.2021 Interest expense a/c Installment notes a/c Dr. 250 578.64 Dr. To Cash 828.64 (Installment Note Payable) Interest expense in month 1= $50000*6%/12 = $250 Total installment = $828.64 Hence, amount paid towards principal =828.64-250 = $578.64 28.2.2021 Interest expense a/c 247.11 Dr. Installment notes a/c Dr. 581,53 To Cash 828.64 |(Installment Note Payable) Reduced principal in month 2 = 50000-578.64 = $49421.36 Interest expense in month 2 = $49421.36*6%/12 = $247.11 %3D Total installment = $828.64 Hence, amount paid towards principal =828.64-247.11 = $581.53

Jalen Company Requirement 1 Journal Enteries Debit in $ Credit in $ Particulars Date 1.1.2021 Land a/c 800000 Dr. To Notes Payable 800000 (To record purchase of Land) Requirement 2 Journal Enteries Particulars Debit in $ Credit in $ Date Interest Expense a/c Notes Payable a/c 30.6.2021 Dr. 24000 Dr. 191221.64 To Cash 215221.64 (To record payment of first installment) 800000 x 6% x 6/12 31.12.2021 Interest Expense a/c Dr. 18263.35 Notes Payable a/c Dr. 196958.29 To Cash 215221.64 (To record payment of first installment) (800000 - 191221.64) x 6% x 6/12 Requirement 3 Balance sheet As at 31.12.2021 Notes Payable (800000 - 191221.64 - 196958.29) 411820.07 Income Statement For the period ending 31.12.2021 Interest Expense ( 24000 + 18263.35) 42263.35