Recording and Assessing the effect of installment loansOn December 31, 2015, Dehning Inc. borrowed $500,00 on 8%, 10 year - mortgage note payable. The note is to be repaid inn equal quarterly installments of $18,278 (beginning March 31, 2016).a. Prepare journal entries to reflect (1) the issuance of the mortgage note payable, (2) the payment 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. b. Post the journal entries of part a to their respective T accountsc. Record each of the transactions from part a in the financial statement effect template

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Asked Nov 25, 2019
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Recording and Assessing the effect of installment loans
On December 31, 2015, Dehning Inc. borrowed $500,00 on 8%, 10 year - mortgage note payable. The note is to be repaid inn equal quarterly installments of $18,278 (beginning March 31, 2016).
a. Prepare journal entries to reflect (1) the issuance of the mortgage note payable, (2) the payment 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.
b. Post the journal entries of part a to their respective T accounts
c. Record each of the transactions from part a in the financial statement effect template

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Expert Answer

Step 1
  1. Prepare journal entries for the given transaction:
Credit
General journal
Debit (S)
Date
(S)
12/31/2015 Cash
$500,000
Mortgage notes payable
$500,000
Interest expense
3/31/16
$10,000
(S500,000x8%x3/12)
Mortgage notes payable
$8,278
Cash
$18,278
Interest
сеxpense
6/30/16
$9,834
($500,000-8,278)x8%x3/12
Mortgage notes payable
$8,444
Cash
$18,278
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Credit General journal Debit (S) Date (S) 12/31/2015 Cash $500,000 Mortgage notes payable $500,000 Interest expense 3/31/16 $10,000 (S500,000x8%x3/12) Mortgage notes payable $8,278 Cash $18,278 Interest сеxpense 6/30/16 $9,834 ($500,000-8,278)x8%x3/12 Mortgage notes payable $8,444 Cash $18,278

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Step 2

2. Prepare t accounts:

...
Cash
12/31/15 $500,000 3/31/16 $18,278
6/30/16 $18,278
$500,000 Total
Total
$36,556
Bal
$463,444
Mortgage notes payable
$8,278 12/31/15 $500,000
$8,444
3/31/16
6/30/16
$16,722 Total
Bal
Total
$500,000
$483,278
Interest expense
3/31/16 $10,000
$9,834
$19,834
6/30/16
Bal.
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Cash 12/31/15 $500,000 3/31/16 $18,278 6/30/16 $18,278 $500,000 Total Total $36,556 Bal $463,444 Mortgage notes payable $8,278 12/31/15 $500,000 $8,444 3/31/16 6/30/16 $16,722 Total Bal Total $500,000 $483,278 Interest expense 3/31/16 $10,000 $9,834 $19,834 6/30/16 Bal.

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