Question

Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, “I’ve always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place.” On November 1, 2022, Great Adventures purchased the land by issuing a $600,000, 6%, 10-year installment note to the seller. Payments of $6,661 are required at the end of each month over the life of the 10-year loan. Each monthly payment of $6,661 includes both interest expense and principal payments (i.e., reduction of the loan amount).

Late that night Tony exclaimed, “We now have land for our new camp; this has to be the best news ever!” Suzie said, “There’s something else I need to tell you. I’m expecting!” They decided right then, if it was a boy, they would name him Venture.

• Record the issuance of the long-term note payable for the purchase of land on November 1, 2022.
• Record the first monthly payment on the long-term note payable, made on November 30, 2022.
• Record the second monthly payment on the long-term note payable, made on December 31, 2022.
• The 12 monthly payments in 2023 (following year) will reduce the note's balance by an additional $45,616. Record the reclassification of this amount from long-term notes payable to current notes payable.
• Prepare the closing entry for revenue accounts.
• Prepare the closing entry for expense and loss accounts.

Prepare general journal, income statement (unadjusted), and balance sheet.

Answer 1

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Note Payable Schedule:
Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
	a	b=Carrying Value*6%*1/12	c=a-b
1/11/2022				$         600,000
30/11/2022	$                                                                                    6,661	$                                    3,000	$                                  3,661	$         596,339
31/12/2022	$                                                                                    6,661	$                                    2,982	$                                  3,679	$         592,660
Date	Account	Debit	Credit
1/11/2022	Land	$                               600,000
	Note Payable-Long Term		$                             600,000
	(To record issuance of Note)
30/11/2022	Interest Expense	$                                    3,000
	Note Payable	$                                    3,661
	Cash		$                                  6,661
	(To record first payment)
31/12/2022	Interest Expense	$                                    2,982
	Note Payable	$                                    3,679
	Cash		$                                  6,661
	(To record Second payment)
31/12/2022	Note Payable-Long Term	$                                 45,616
	Current Portion of Long Term Note		$                                45,616
	(To record reclassification)
	Closing Entries and Income Statement	Not Feasible as data not available