Question

Shamrock, Inc. issues a $550,000, 10%, 10-year mortgage note on December 31, 2017, to obtain financing for a new building. The terms provide for annual installment payments of $89,510.

Prepare the entry to record the mortgage loan on December 31, 2017, and the first installment payment on December 31, 2018.

Answer 1

Amortization Schedule
	Principal	Interest	Repayment	Outstanding	Principal repaid
1	550,000	55,000	(89,510)	515,490	(34,510)
2	515,490	51,549	(89,510)	477,529	(37,961)
3	477,529	47,753	(89,510)	435,772	(41,757)
4	435,772	43,577	(89,510)	389,839	(45,933)
5	389,839	38,984	(89,510)	339,313	(50,526)
6	339,313	33,931	(89,510)	283,734	(55,579)
7	283,734	28,373	(89,510)	222,598	(61,137)
8	222,598	22,260	(89,510)	155,348	(67,250)
9	155,348	15,535	(89,510)	81,372	(73,975)
10	81,372	8,138	(89,510)	0	(81,372)
Entry on 31-Dec-2017
	Bank a/c         Dr		550,000
	To Mortgage Loan			550,000
	(Being loan raised)
Entry on 31-Dec-2018
	Interest expense     Dr		55,000
	To Interest payable			55,000
	(Being Interest on mortgage loan recognized)
	Mortgage Loan    Dr		34,510
	Interest payable   Dr		55,000
	To Bank			89,510
	(Being the first installment paid)