Question

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 $500,000, 6%, 10-year installment note to the seller. Payments of $5,551 are required at the end of each month over the life of the 10-year loan. Each monthly payment of $5,551 includes both interest expense and principal payments (i.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.

Required:

1. Complete the first three rows of an amortization schedule. (Round your final answers to the nearest dollar amount.)

2. & 3. Record the purchase of land with the issuance of a long-term note payable on November 1, 2022, and the first two payments on November 30, 2022, and December 31, 2022, and calculate the remaining balance of the note payable as of December 31, 2022.

Answer 1

1
Date	Cash paid	Interest expense	Change in Carrying value	Carrying value
11/01/2022				500000
11/30/2022	5551	2500	3051	496949
12/31/2022	5551	2485	3066	493883
2
Date	General Journal	Debit	Credit
November 01, 2022	Land	560000
	Notes Payable		560000
November 30, 2022	Interest expense	2500		=500000*6%/12
	Notes Payable	3051
	Cash		5551
December 31, 2022	Interest expense	2485		=496949*6%/12
	Notes Payable	3066
	Cash		5551
3
Balance	493883