Question

P15-4A

r mortgage note on Decem- P154A Talkington Electronics issues a $400,000, 8%, 15-yea schedule and journal entriesber 31, 2016. The proceeds from the note are to be used in financing a new research for a mortgage note rato Prepare instal ent payments (LO 3,4) b) December 31 debit ble. ratory. The terms of the note provide for annual installment payments, exclusive of re estate taxes and insurance, of $59,612. Payments are due on December 31. Instructions (a) Prepare an installment payments schedule for the first 4 years. Mortgage Payable $27,612 (b) Prepare the entries for (1) the loan and (2) the first installment payment.

Answer 1

A) Bond Discount Amortization

Annual Interest Periods	Interest to be Paid	Interest expense	Discount Amortization	Principal balance
	(A)	(B) =(D×8%)	C = (B - A)	D = (D - C)
Issue date				$400,000
1	$59,612	$32,000	$27,612	$372,388
2	$59,612	$29,791	$29,821	$342,567
3	$59,612	$27,405	$32,207	$310,360
4	$59,612	$24,829	$34,783	$275,577

B)

	Particulars	Debit	Credit
1)	Cash	400,000
	Mortgage payable		400,000
2)	Interest expenses	32,000
	Mortgage payable	27,612
	Cash		59,612

　

Computation of interest expenses on mortgage payable:

Interest expenses = Mortgage loan payable * Interest rate * Time period

=$400,000 * 8% * 1

=$32,000

Thus, interest expenses on mortgage payable equals $32,000.

Computation of mortgage payable:

Mortgage payable =Cash payment - Interest expenses

=$59,612 - $32,000

= $27,612

Thus, mortgage payable equals $27,612

3) Current liability is categorised to be obligation that the an organisation is required to pay from the remaining current assets or creation of other current liabilities within the operating cycle or a fiscal year whichever is higher. Long-term liabilities are obligations that the organisation is required to pay after at least one year or more. These are otherwise termed to be the long-term debt

Balance Sheet (Partial)
Particulars	Amount	Amount
Liabilities:
Current liabilities:
Current portion of mortgage payable	29,821
Total current liabilities		29,821
Long-term liabilities:
Mortgage payable	342,567
Total long-term liabilities		342,567
Total liabilities		342,567