On December 31, 2013, Wasley Corporation borrowed $500,000 on a 10%, 10-year mor

Question

On December 31, 2013, Wasley Corporation borrowed $500,000 on a 10%, 10-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2014. a. Compute the amount of the semiannual installment payment using a financial calculator or Excel, and round amount to the nearest dollar. b. Prepare the journal entry (1) to record Wasley’s borrowing of funds on December 31, 2013, (2) to record Wasley’s installment payment on June 30, 2014, and (3) to record Wasley’s installment payment on December 31, 2014. (Round amounts to the nearest dollar.)

Explanation / Answer

period 60 rate 10% present value 500000 PMT $50,164.75 Journal 1 Cash 500000 To Long term debt 500000 2 Long term debt 25164.75 Interest Expense 25000 To cash 50164.755 3 Long term debt 476250.00 Interest Expense 23750 To cash 50164.755

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