Question

Ayayai Co. receives $2,980,000 when it issues a $2,980,000, 7%, mortgage note payable to finance the construction of a building at December 31, 2019. The terms provide for annual installment payments of $294,000 on December 31.

Prepare the journal entries to record the mortgage loan and the first two installment payments. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Issuance of Note
Dec. 31, 2019	enter an account title for the journal entry on December 31, 2016	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2016	enter a debit amount	enter a credit amount
First Installment Payment
Dec. 31, 2020	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
Second Installment Payment
Dec. 31, 2021	enter an account title for the journal entry on December 31, 2018	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2018	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2018

Answer 1

· Required journal entries asked

Date	General Journal	Debit	Credit
31-Dec-19	Cash	$2,980,000
	Notes Payable		$2,980,000
	(to record issuance)
31-Dec-20	Interest Expense ($2980000 x 9%)	$208,600
	Notes Payable	$85,400
	Cash		$294,000
	(to record #1 payment)
31-Dec-21	Interest Expense ([$2980000 - 85400] x 7%)	$202,622
	Notes Payable	$71,378
	Cash		$274,000
	(to record #2 payment)