Problem P10-5A

P10-5A
Fordyce Electronics issues a $400,000, 8%, 10-year mortgage note on December 31, 2010. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $29,433. Payments are due June 30 and December 31.

Prepare installment payments schedule and journal entries for a mortgage note payable.

Instructions

(a)  Prepare an installment payments schedule for the first 2 years.

(b)  Prepare the entries for (1) the loan and (2) the first two installment payments.
June 30 Mortgage Notes Payable $13,433

(c)  Show how the total mortgage liability should be reported on the balance sheet at December 31, 2011.
Current liability—2011: $29,639
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Answers

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(a) Apr. 1 Land .................................................. 2,130,000

Cash ......................................................... 2,130,000

May 1 Depreciation Expense .......................................    26,000

AccumulatedDepreciation—

  Equipment ...........................................    26,000

  ($780,000X 1/10 X 4/12)

1 Cash ..................................................  450,000

AccumulatedDepreciation—

  Equipment .....................................................   338,000

Equipment ...............................................  780,000

Gainon Disposal .....................................    8,000

Cost $780,000

Accum.depreciation—

  equipment 338,000

   [($780,000 X1/10 X 4) +
$26,000]

Book value  442,000

Cash proceeds 450,000

Gain ondisposal $  8,000

June 1 Cash .................................................. 1,500,000

Land .........................................................  400,000

Gainon Disposal ..................................... 1,100,000

July 1 Equipment ......................................................... 2,000,000

Cash ......................................................... 2,000,000

Dec. 31 Depreciation Expense .......................................    50,000

AccumulatedDepreciation—

  Equipment ...........................................    50,000

  ($500,000X 1/10)

31 Accumulated Depreciation—

  Equipment .....................................................   500,000

Equipment ...............................................   500,000


Cost $500,000

Accum.depreciation—

  equipment  500,000

  ($500,000 X1/10 X 10)

Book value $ 0

(b) Dec. 31 Depreciation Expense .......................................   570,000

AccumulatedDepreciation—

  Buildings ..............................................  570,000

  ($28,500,000X 1/50)

31 Depreciation Expense ....................................... 4,772,000

AccumulatedDepreciation—

  Equipment ........................................... 4,772,000

($46,720,000* X1/10) $4,672,000

[($2,000,000 X1/10) X 6/12]    100,000

$4,772,000

*($48,000,000 –$780,000 – $500,000)

(c) JIMENEZCOMPANY

PartialBalance Sheet

December 31, 2009

Plant Assets*

Land ....................................................................... $ 5,730,000

Buildings ................................................................. $28,500,000

Less: Accumulated depreciation—

  buildings ............................................... 12,670,000  15,830,000

Equipment ..............................................................  48,720,000

Less: Accumulated depreciation—

  equipment ............................................ 9,010,000 39,710,000

Total plant assets .......................................... $61,270,000

*See T-accounts which follow.


Land

Bal.  4,000,000

Apr. 1  2,130,000

June 1    400,000

Bal.  5,730,000

Buildings

Bal. 28,500,000

Bal. 28,500,000

Accumulated Depreciation—Buildings

Bal. 12,100,000

Dec. 31 adj.    570,000

Bal. 12,670,000

Equipment

Bal. 48,000,000

July 1  2,000,000

May 1    780,000

Dec. 31    500,000

Bal. 48,720,000

Accumulated Depreciation—Equipment

May 1    338,000

Dec. 31    500,000

Bal.  5,000,000

May 1     26,000

Dec. 31     50,000

Dec. 31 adj.  4,772,000

Bal.  9,010,000

answered 2 years ago

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