Question

Crane Company receives $246,000 when it issues a $246,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2022. The terms provide for annual installment payments of $41,000 on December 31. Prepare an amortization schedule of a mortgage note for two years. Annual Interest Period Cash Payment Interest Expense Reduction of Principal Principal Balance Issue date 12/31/23 12/31/24

Answer 1

		CRANE COMPANY
	Annual interest period	Cash payment	Interest expense	Reduction of principal	Principal balance
	Issue date	$0	$0	$0	$246,000
	12/31/2023	$41,000	$24,600	$16,400	$229,600
	12/31/2024	$41,000	$22,960	$18,040	$211,560
	Journal Entry
	Date	Account title and description		Debit	Credit
	31-Dec-22	Cash		$246,000
		Mortgage payable			$246,000
		(Loan taken)
	Journal entry for first two installment
	Date	Account title and description		Debit	Credit
	31-Dec-23	Mortgage payable		$16,400
		Interest expense		$24,600
		Cash			$41,000
		(first installment paid)
	31-Dec-24	Mortgage payable		$18,040
		Interest expense		$22,960
		Cash			$41,000
		(second installment paid)
		SUNDLAND COMPANY
	Date	Account title and description		Debit	Credit
(a)	31-Dec-21	Cash		$270,720
		Discount on bond payable		$11,280
		Bonds payable			$282,000
		(bonds issued at discount)
(b)	31-Dec-22	Interest expense		$20,492
		Cash			$19,740
		Discount on bond payable			$752	(11,280/15)
(C)	31-Dec-36	Bonds payable		$282,000
		Cash			$282,000