Mortgage Extra Credit Problem 15 points Due Last day of clas

Mortgage Extra Credit Problem 15 points Due: Last day of class On December 31,2016, ABC Corporation purchased a building costing $300,000, signing a 10%, 5-year mortgage note payable on December 31, 2016, Five ANNUAL payments will be made each year to pay back the mortgage beginning on December 31,2017 REQUIRED: A. what is the annual installment payment required at a 10% rate? (3 pts) B. Give the general journal entry to record the purchase of the building (2 pts) C. Prepare an effective interest amortization table for the five years (5 pts) D. Give the general journal entries to record each of the five mortgage payments beginning on December 31, 2017. illey asons.inc. All Rights Reserved. A Division of Johnwileyasons.Ine Ma

Solution

Answer A. Annual Payment = P / PVFA (i, n) Annual Payment = $300,000 / PVFA (i = 10%, n = 5 year) Annual Payment = $300,000 / 3.791 Annual Payment = $79,134.79 or say $79,135 (Approx.) Answer B. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-16 Building          300,000 Mortgage Notes Payable          300,000 (Record the purchase of building) Answer B. Date Payment Interest Principal Repayment Outstanding Balance 31-Dec-16                        -                           -                          -               300,000 31-Dec-17               79,135                30,000               49,135             250,865 31-Dec-18               79,135                25,087               54,048             196,817 31-Dec-19               79,135                19,682               59,453             137,364 31-Dec-20               79,135                13,736               65,399                71,965 31-Dec-21               79,135                  7,170               71,965                        (0) Answer D. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-17 Interest Expense            30,000 Mortgage Notes Payable            49,135 Cash            49,135 (record the installment paid) 31-Dec-18 Interest Expense            25,087 Mortgage Notes Payable            54,048 Cash            79,135 (record the installment paid) 31-Dec-19 Interest Expense            19,682 Mortgage Notes Payable            59,453 Cash            79,135 (record the installment paid) 31-Dec-20 Interest Expense            13,736 Mortgage Notes Payable            65,399 Cash            79,135 (record the installment paid) 31-Dec-21 Interest Expense              7,170 Mortgage Notes Payable            71,965 Cash            79,135 (record the installment paid)