Question

On December 31, 2017, Eppel, Inc. Borrowed $900,000 on an eight percent, 15-year mortgage note payable. The note is to be repaid in equal semiannual installments of $52,047 (payable on June 30 and December 31). Prepare journal entries to reflect (a) issuance of the mortgage note payable, (b) the payment of the first installment on June 30, 2018, and (c) the payment of the second installment on December 31, 2018. Round amounts to the nearest dollar

Answer 1

The journal entries would be: (a) Debit Cash $900,000, Credit Mortgage Note Payable $900,000; (b) Debit Mortgage Note Payable $26,007, Debit Interest Expense $26,040, Credit Cash $52,047; and (c) Debit Mortgage Note Payable $26,244, Debit Interest Expense $25,800, Credit Cash $52,044.

Step-by-step explanation:

To prepare the journal entries for the issuance of the mortgage note payable, payment of the first installment on June 30, 2018, and payment of the second installment on December 31, 2018, we will use the following accounts:

Cash: Represents the cash received from the issuance of the mortgage note and the cash paid for the installment payments.

Mortgage Note Payable: Represents the long-term liability incurred when borrowing the money.

Interest Expense: Represents the interest paid on the mortgage note payable.

Here are the journal entries:

a) Issuance of the mortgage note payable:

Debit: Cash $900,000

Credit: Mortgage Note Payable $900,000

b) Payment of the first installment on June 30, 2018:

Debit: Mortgage Note Payable $26,007

Debit: Interest Expense $26,040

Credit: Cash $52,047

c) Payment of the second installment on December 31, 2018:

Debit: Mortgage Note Payable $26,244

Debit: Interest Expense $25,800

Credit: Cash $52,044

Answer 2

The student's question about the mortgage note involves creating journal entries for the issuance of the mortgage note payable, and the first and second semiannual installment payments.

Step-by-step explanation:

The student's question relates to the issuance of a mortgage note payable and the subsequent semiannual installment payments. The three events that require journal entries are:

• (a) Issuance of the mortgage note on December 31, 2017.
• (b) Payment of the first installment on June 30, 2018.
• (c) Payment of the second installment on December 31, 2018.

The following journal entries would reflect these transactions (rounded to the nearest dollar):

1. Issuance of the note payable:
   December 31, 2017
   
2. First installment payment:
   June 30, 2018
   
3. Second installment payment:
   December 31, 2018
   

Note: The actual breakdown of the payment between principal and interest would require an amortization table or calculating the interest for each period based on the outstanding balance of the note.