Question

P10-4A Starlight Graphics Ltd. signed a 10-year, 6.5%, $700,000 mortgage on June 30, 2017, to help finance a new research laboratory. The mortgage terms provide for semi- annual blended principal and interest payments of $48,145. Payments are due on December 31 and June 30. The company's year-end is June 30. Instructions (a) Prepare an instalment payment schedule for the first two years. Round all amounts to the nearest dollar. (b) Record the receipt of the mortgage loan on June 30, 2017. (c) Record the first two instalment payments, on December 31, 2017, and June 30, 2018. (d) Show the statement of financial position presentation of the mortgage payable at June 30, 2018.

Answer 1

The mortgage payment of $700,000 is received at 6.5%

(a) Instalment payment schedule is as follows,

Period	Opening Balance (A)	Interest 6.5% for 6 mth (B) = (A) * 6.5% *(6/12)	Total Instalment (C) = Fixed Payment	Repayment of Principle (D) = (C) - (B)	Closing Balance
December 31 2017	700,000	22,750	48,145	25,395	674,605
June 30 2018	674,605	21,924.66	48,145	26,220.34	648,384.66
December 31 2018	648,384.66	21,072.50	48,145	27,072.50	621,312.16
June 30 2019	621,312.16	20,192.64	48,145	27,952.36	593,359.80

(b) Recording of transaction for Mortgage is as follows,

Date	Account	Ref	Debit	Credit
June 30 2017	Cash Mortgage Payment/Loan		700,000	700,000
	Mortgage Received

(c) Recording of first two instalment payment

Date	Account	Ref	Debit	Credit
December 31 2017	Mortgage Payment/Loan		25,395
	Interest Exps [from (a) ]		22,750
	Cash			48,145
June 30 2018	Mortgage Payment/Loan		26,220.34
	Interest Exps [from (a) ]		21,924.66
	Cash			48.145

(d) Financial position

Total balance of Mortgage Payable as on June 30 2018 is $ 648,384.66 as calculated in (a). Mortgage payable in 12 month is shown under short term liability is $27,072.50 and balance is shown under long term liability which is $621,312.16 (648,984.66-27072.50) in Financial position.

Hope above calculation and answer help you.