Cullumber Co. receives $248,400 when it issues a $248,400, 10%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $41,400 on December 31. Prepare the journal entries to record the mortgage loan and the first two payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit  Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022                Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022                        Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022

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Q: ABC Bank granted a loan to a borrower on Jan. 1, 2019. The interest on the loan is 10% payable…

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A:

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A: Formulas:

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A: At first, we will find out the present value of the note payable.

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Q: Jernigan Co. receives $240,000 when it issues a $240,000, 6%, mortgage note payable to finance the…

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.