. .V1 UC?Ung in thelong-term liabilities section. uscording and Assessing the Ef

Question

. .V1 UC?Ung in thelong-term liabilities section. uscording and Assessing the Effects of Installment Loans RecDecember 31, 2015, Dehning, Inc., borrowed $500,000 able. The note is to be repaid in equal quarterly installments of $18 278 (beginning March 31,2016). po on an 8%, 10-year mortgage note pay - Prepare journal entries to reflect (1) the issuance of the mortgage note payable, (2) the pay- ment of the first installment on March 31,2016, and (3) the payment of the second installment on June 30, 2016. Round amounts to the nearest dollar. Post the journal entries from part a to their respective T-accounts. Record each of the trans a. b. actions from part a in the financial statement effects template. C.

Explanation / Answer

a 1. Date Debit Credit 31/12/2015 Cash $             500,000.00 Installment Notes $             500,000.00 a 2. 3/31/2016 Interest Expenses $               10,000.00 Installment Notes $                  8,278.00 Cash $               18,278.00 a 3. 6/30/2016 Interest Expenses $                  9,834.44 Installment Notes $                  8,443.56 Cash $               18,278.00 Interest Expenses and Installment Notes Calculation Principal at beginning of quarter Cash Payment Interest expense Principal Payment= Cash Payment-Interest payment Principal Balance at end of period 1 500,000 18,278 5,00,000*8%*3/12=10,000 18,278-10,000=8278 491,722 2 491,722 18,278 4,91,722*8%*3/12=9834.44 18,278-9834.44=8443.56 483,278 b Cash Account 31/12/2015 Installment Notes $             500,000.00 3/31/2016 Interest Expenses $               10,000.00 3/31/2016 Installment Notes $                  8,278.00 6/30/2016 Interest Expenses $                  9,834.44 6/30/2016 Installment Notes $                  8,443.56 Interest Expenses Account 3/31/2016 Cash $               10,000.00 6/30/2016 Cash $                  9,834.44 Installment Notes Account 3/31/2016 Cash $                  8,278.00 31/12/2015 Cash $             500,000.00 6/30/2016 Cash $                  8,443.56 c Income Statamenent Revenue     - Less: Expenses Interest Expenses $               19,834.44 Net Income before taxes Balance Sheet Current Assets     - Fixed Assets    - Total Assets Liabilities Notes Installments $             500,000.00 Less: Repaid $                  8,278.00 Less: Repaid $                  8,443.56 $             483,278.44 Shareholders Equity    - Total Liabilities

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