Question

Carla Vista Co. receives $354,000 when it issues a $354,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $59,000 on December 31.

Prepare the journal entries to record the mortgage loan and the first two payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022
Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022
Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022

Answer 1

Solution: Credit Date Account Titles and Explanation Dec. 31, 2020 Cash Note payable Debit 354000 354000 Dec. 31, 2020 Interest expense (354000*10%) Note payable 35400 23600 Cash 59000 Dec. 31, 2021 Interest expense (354000-23600)* 10% | 33040| Note payable 25960 Cash 59000