A. Great Safari Toys issued a $650,000, 5%, 10-year mortgage for building new retail stores. The...

A. Great Safari Toys issued a $650,000, 5%, 10-year mortgage for building new retail stores. The terms have semi annual payments of $41,696. The entry to record the first semi annual installment payment for this mortgage is:

B. Great Safari Toys reported net income of $300,000. Interest expense was $40,000 and income taxes were $100,000. The times interest earned ratio was _

C. On January 1, 2017, Great Safari Toy signed a $500,000, 6%, 5-year mortgage note that is payable in annual installments of $118,698 every January 1. On December 31, 2017, the unpaid principal balance should be reported as

Please show work. Thanks

Solutions

Expert Solution

a) Semi annual interest paid = 650000*5%*6/12 = 16250

b) Times interest earned ratio = Income before interest and tax/Interest expense = (300000+40000+100000)/40000 = 11

c) First interest expense =500000*.06 = 30000

Principal balance in first installment = 118698-30000 = 88698

On December 31,2017 Unpaid principal balance = 500000-88698 = 411302

ekkarill92 answered 2 years ago

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