Question

On December 31, 2015, Wasley Corporation borrowed $400,000 on a 8%, 10-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2016.

Required
a. Compute the amount of the semiannual installment payment using a financial calculator or Excel, and round amount to the nearest dollar.

Payment: $Answer

b. Prepare the journal entry (1) to record Wasley’s borrowing of funds on December 31, 2015, (2) to record Wasley’s installment payment on June 30, 2016, and (3) to record Wasley’s installment payment on December 31, 2016. (Round amounts to the nearest dollar.)

General Journal
Date	Description	Debit	Credit
12/31/15	AnswerCashMortgage note payableInterest expense	Answer	Answer
	AnswerCashMortgage note payableInterest expense	Answer	Answer
06/30/16	Interest expense	Answer	Answer
	AnswerCashMortgage note payableInterest expense	Answer	Answer
	AnswerCashMortgage note payableInterest expense	Answer	Answer
12/31/16	Interest expense	Answer	Answer
	AnswerCashMortgage note payableInterest expense	Answer	Answer
	AnswerCashMortgage note payableInterest expense	Answer	Answer

c. Post the journal entries from part b to their respective T-accounts.

Cash (A)
12/31/15	Answer	Answer
06/30/16	Answer	Answer
12/31/16	Answer	Answer

Mortgage Note Payable (L)
12/31/15	Answer	Answer
06/30/16	Answer	Answer
12/31/16	Answer	Answer

Interest Expense (E)
12/31/15	Answer	Answer
06/30/16	Answer	Answer
12/31/16	Answer	Answer

d. Record each of the transactions from part b in the financial statement effects template.

Balance Sheet										Income Statement
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital		Revenue	-	Expenses	=	Net Income
12/31/18 Borrow $500,000 on a 10-year mortgage note payable	Answer	+	Answer	=	Answer	+	Answer	+	Answer		Answer	-	Answer	=	Answer
6/30/19 Interest payment on note	Answer	+	Answer	=	Answer	+	Answer	+	Answer		Answer	-	Answer	=	Answer
12/31/19 Interest payment on note	Answer	+	Answer	=	Answer	+	Answer	+	Answer		Answer	-	Answer	=	Answer

Answer 1

a. The Semi-annual Installment Payment:

Borrowed Amount	400000
Annual rate	0.08
Semiannual interest rate	0.04
N (10*2)	20
PMT	$29,432.70

=PMT(0.04,20,-400000,0,0) b.
		Date	Decsription	Debit	Credit
		12/31/15	Cash	400000.00
			Mortgage Notes Payable		400000.00
		06/30/16	Interest Expense (400,000 * 8%/2)	16000.00
			Mortgage Notes Payable	13432.70
			Cash		29432.70
		12/31/16	Interest Expense ((400,000 - 13432.70)*8%/2)	15462.69
			Mortgage Notes Payable	13970.01
			Cash		29432.70

c.

	Cash
12/31/15	400000.00	29432.70	06/30/16
		29432.70	12/31/16
	Mortgage Notes Payable
06/30/16	13432.70	400000.00	12/31/15
12/31/16	13970.01
	Interest Expense
06/30/16	16000.00	400000.00	12/31/15
12/31/16	15462.69

d.

Balance Sheet

Income Statement

Transaction

Cash Asset

+

Non Cash Assets

=

Liabilities

+

Contrib. Capital

+

Earned Capital

Revenue

-

Expenses

=

Net Income

12/31/15 Borrowed $400,000 on a 10 year mortgage notes payable

400000.00

+

=

400000.00

+

+

-

06/30/16 Interest payment on note

-29432.70

+

=

-13432.70

+

+

-16000.00

-

16000.00

=

-16000.00

12/31/16 Interest Payment on note

-29432.70

+

=

-13970.01

+

+

-15462.69

-

15462.69

=

-15462.69