Question

Larkspur, Inc. issues an $740,000, 15%, 10-year mortgage note on December 31, 2019, to obtain financing for a new building. The terms provide for annual installment payments of $147,447. Prepare the entry to record the mortgage loan on December 31, 2019, and the first installment payment on December 31, 2020. (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 Date Debit Credit Dec. 31, 2019 Dec. 31, 2020

Answer 1

Credit S Journal entries :- Date Accounts Title & Explanation Debit 31-Dec-19 Cash 740,000 To 15% Mortgage Payable (Entry for recording of 10-year, 15% mortgage payable) 740,000 111,000 36,447 31-Dec-20 Interest expense (740000*15%) 15% Mortgage Payable (Refer amortization table) To Cash (Entry for recording of first installment payment) 147,447

Amortization Schedule :- Year Beginning Annual Interest balance of Installment expenses @15% Mortgage Payment of Beginning Payable (A) balance (B) 740,000 147,447 111,000 703,553 147,447 105,533 661,639 147,447 99,246 613,438 147,447 92,016 558,006 147,447 83,701 494,260 147,447 74,139 420,952 147,447 63,143 336,648 147,447 50,497 239,699 147,447 35,955 128,206 147,447 19,231 Ending balance of Repayment Mortagage (A-B) Payable 36,447 703,553 41,914 661,639 48,201 613,438 55,431 558,006 63,746 494,260 73,308 420,952 84,304 336,648 96,950 239,699 111,492 128,206 128,206