Question

Exercise 15-10 a-b Cullumber Company borrowed $302,000 on January 1, 2020, by issuing a $302,000, 10% mortgage note payable. The terms call for annual installment payments of $43,000 on December 31. Prepare the journal entries to record the mortgage loan and the first two installment payments. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Account Titles and Explanation Debit Credit

Answer 1

Exercise 15-10 a) Date January 1, 2020 Credit Account Titles and Explanation Cash Mortgage Note Payable Debit $302.000 $302.000 December 31, 2020 Interest Expense (S302,000 * 10%) Mortgage Note Payable Cash $30.200 $12.800 $43.000 December 31, 2021 Interest Expense [(S302,000 - $12.800) * 10%] Mortgage Note Payable Cash $28.920 $14.080 $43.000 b) $14,080 Current Liability [$43.000 - ((S302,000 - $12,800) * 10%)] Long-term liability [($302.000 - $12.800 - $14.080)] $275,120 Exercise 15-10 Income before interest and taxes Interest expense ($2,000,000 * 7%) Income before income taxes Income tax expense (30%) Net Income (a) Issue Stock Issue Bond $710.000 $710.000 SO $140.000 $710.000 $570,000 $213.000 $171,000 $497,000 $399,000 Outstanding shares (510.000 + 200.000) (b) Eatning Per share (a) (b) $710.000 $0.70 510,000 $0.78 Net Income is $497,000 if stock is used. However, earnings per share is $0.70 than earnings per share if bonds are used because of the additional shares of stock that are outsatnding. Exercise 15-11 Crane Farm Corporation Balance sheet (Partial) Long-term Liabilities Bonds Payable, due 2025 Add: Premium on Bonds Payable Lease Liability Total long-term Liabilities $177,300 $18,000 $195,300 $87.300 $282,600