Question

Blossom Company borrowed $311,000 on January 1, 2020, by issuing a $311,000, 10% mortgage note payable. The terms call for annual installment payments of $52,000 on December 31. (a) Prepare the journal entries to record the mortgage loan and the first two installment payments. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

Answer:

Blossom Company

Journal Entries:

January 1, 2020:

Debit Cash $311,000

Credit Mortgage Note Payable $311,000

To record the borrowing of 10% mortgage note payable.

December 31, 2020:

Debit Mortgage Note Payable $52,000

Credit Cash $52,000

To record the first repayment of the mortgage note.

Debit Interest Expense $31,100

Credit Cash $31,100

To record the payment of interest on the note.

Explanation:

a) Data and Calculations:

Mortgage Note Payable = $311,000

Interest rate of mortgage = 10%

Annual installment payments = $52,000

Date of repayment = December 31

Interest expense = $31,100 ($311,000 * 10%)