Question

Problem 15-4A Talkington Electronics issues a $439,500, 3%, 15-year mortgage note on December 31, 2016. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide for annual installment payments, exclusive of real estate taxes and insurance, of $51,523. Payments are due on December 31. Prepare an installment payments schedule for the first 4 years. (Round answers to 0 decimal places, e.g. 15,250.) Prepare the entries for (1) the loan and (2) the first installment payment Show how the total mortgage liability should be reported on the balance sheet at December 31, 2017.

Answer 1

	cash	interest	Reduction	principal
annual	payment	expense	of	balance
interest		3%	principal
period
issue date				439,500
1	51,523	13,185	38,338	401,162
2	51,523	12,035	39,488	361,674
3	51,523	10,850	40,673	321,001
4	51,523	9,630	41,893	279,108
Date	Account titles & Explanations				Debit	Credit
12/31/2016	cash				439,500
	mortgage payable					439,500
12/31/2017	mortgage payable				38,338
	interest expense				13,185
	cash					51,523
	Balance sheet
Current liabilities
current portion of mortgage notes payable						39,488
long term liabilites
mortgage payable						361,674