On January 1, 2021, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, J

On January 1, 2021, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, Jalen plans to make four installment payments of $215,221.64 on June 30 and December 31 in 2021 and 2022. The payments include interest at a rate of 6%.

Required:

1. Record the purchase of land when the note is issued.

2. Record the first installment payment on June 30, 2021, and the second installment payment on December 31, 2021.

3. Calculate the balance of Notes Payable and Interest Expense on December 31, 2021.

Solutions

Expert Solution

a) Journal entry

Date	account and explanation	debit	Credit
Jan 1, 2021	Land	800000
	Notes payable		800000
	(To record purchase land)

b) Journal entry

Date	account and explanation	debit	credit
June 30, 2021	Interest expense (8000006%6/12)	24000
	Notes payable	191221.64
	Cash		215221.64
	(To record installment paid)

Dec 31, 2021	Interest expense (800000-191221.64)*6%	18263.35
	Notes payable	196958.29
	Cash		215221.64
	(To record amount paid)

Interest expense on December 31, 2021 = 24000+18263.25 = 42263.25

Notes payable = 800000-191221.64-196958.29 = 411820.07

a) Journal entry

Date	account and explanation	debit	Credit
Jan 1, 2021	Land	800000
	Notes payable		800000
	(To record purchase land)

Junaid answered 1 year ago

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