Question

Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, “I’ve always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place.” On November 1, 2022, Great Adventures purchased the land by issuing a $520,000, 6%, 8-year installment note to the seller. Payments of $6,834 are required at the end of each month over the life of the 8-year loan. Each monthly payment of $6,834 includes both interest expense and principal payments (i.e., reduction of the loan amount).

Late that night Tony exclaimed, “We now have land for our new camp; this has to be the best news ever!” Suzie said, “There’s something else I need to tell you. I’m expecting!” They decided right then, if it was a boy, they would name him Venture.

Required:

1. Complete the first three rows of an amortization schedule

2. & 3. Record the purchase of land with the issuance of a long-term note payable on November 1, 2022, and the first two payments on November 30, 2022, and December 31, 2022, and calculate the remaining balance of the note payable as of December 31, 2022. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.)

4. The 12 monthly payments in 2023 (following year) will reduce the note’s balance by an additional $52,747. How would the remaining balance of the note payable be reported in the balance sheet as of December 31, 2022?

Answer 1

1
Date	Cash paid	Interest expense	Change in Carrying value	Carrying value
11/01/2022				520000
11/30/2022	6834	2600	4234	515766
12/31/2022	6834	2579	4255	511511
2
Date	General Journal	Debit	Credit
November 01,2022	Land	520000
	Notes Payable		520000
November 30,2022	Interest expense	2600		=520000*6%/12
	Notes Payable	4234
	Cash		6834
December 31,2022	Interest expense	2579		=515766*6%/12
	Notes Payable	4255
	Cash		6834
	Balance	511511
4
Current liability	52747
Long-term liability	458764	=511511-52747
Total	511511